NEW YORK: Investors should stick with their stocks despite the sell-off this week because it would be harder to time the market and get back in, according to Brian Levitt, global market strategist for North America at Invesco.
US equities suffered one of the deepest sell-offs of the year last Wednesday as mounting signs of a global economic slowdown stoked fears of a recession. The slump came as a key portion of the bond curve inverted - meaning short-term rates were higher than long-term yields - an indicator that’s previously been a recession warning.
“Long-term investors who broke from an investment plan this week because the yield curve briefly inverted will likely regret it, ” Levitt said, adding that “I don’t think we’re going into a recession.”
He cited factors that may push stocks higher, including his expectation of a September rate cut by the Federal Reserve. The S&P 500 index will probably end the year around 2, 900, slightly ahead of the close on Friday.
“We’re in a growth starved world with no inflation and interest rates that will stay low for a long time, ” he said, reiterating his prediction in 2010 that interest rates will stay low “for the rest of our careers.”
Levitt isn’t alone in making the call for investors to stay in stocks. Mariann Montagne, a fund manager at Gradient Investments, which oversees US$2.3bil, said earlier this week that it may be quite awhile before a recession hits, and “we have a lot of money to make between now and then.”
Still, others are raising concerns about growth prospects.
The US and world economies are at their riskiest moment since the 2008 global financial crisis as trade tensions escalate, former Treasury Secretary Lawrence Summers said on CNN last weekend. Goldman Sachs Group Inc also said fears of a US recession have risen with the trade war. The University of Michigan’s confidence index slumped in August to a seven-month low.
“We have been calling to take profits and recalibrate for some time, ” Tuan Huynh, chief investment officer for Asia-Pacific at Deutsche Bank Wealth Management, said in a Bloomberg Television interview earlier in the week. — Bloomberg
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