The stock market continues its nearly week-long trek downward and investors are searching for reasons. That’s not stopping many from breaking out their buy lists and adding to their favorite stocks and sectors in this downturn.
An uncertain bond market is one possible trigger. Negative implications on the job market after wage increases and uncertainty over whether the U.S. Federal Reserve will raise interest rates are more fear factors leading investors to sell, said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute, a subsidiary of Wells Fargo Bank N.A.
“It doesn’t matter what the causes are,” said Art Hogan, managing director and chief market strategist at B. Riley Financial, a financial service company. “You’ve got some great buying opportunities,” he told CNBC.
“We’re selling everything because we’re so concentrated in our ownership of stocks and ETFs that we’re creating dislocations that are going to be massive opportunity for active managers and stock pickers,” Hogan said.
Here are some hot picks while the market is in distress.
Increased volatility, or uncertainty in the size and direction of market changes, is good for banks, Hogan said Thursday during “Power Lunch.” Add that to rising interest rates and net interest margins and what Hogan called a “lighter regulatory touch” and financials are a bargain.
“And not just in the big names,” said Barry James, president and portfolio manager at James Investment Research, an investment firm. “But on down the line as well in terms of size in the financial area. When rates go up they tend to increase their rates faster than the overall market and they increase their spread.”
James, who was also on Thursday’s Power Lunch, cautioned investors that the “pain” is not yet over and to search for “bargain-type stocks,” such as gold, short and floating-rate notes and to put money into cash.
2. Mid-cycle industrials
“They’re being sold like there is no economy or no economic growth going on,” Hogan said. “They’re being thrown out with the bath water.”
3. Semiconductor stocks
The technology stocks have been less expensive in February, Paul Schatz, president and chief investment officer of Heritage Capital told CNBC during “Closing Bell” on Thursday. He expects market highs to return during the next quarter and said the prime buying time is in the next three to eight months.