The stock market has experienced a series of bear market rallies this year. And while such short-lived bounces can be hard to distinguish from a true market bottom, one investment pro believes a turnaround is on the horizon.
“I think investors at this point should be looking forward to the new bull market, the new business cycle, once the decks have been cleared, and we are not far away,” James Demmert, chief investment officer of Main Street Research, told CNBC’s “Street Signs Asia” Monday.
Demmert said the bear market is now its “third and final phase.” It is now in its 11 month of a typical 12–15-month cycle, according to Demmert — indicating that a bottom could be close.
But investors should remain mindful of macro challenges, he added, warning that the U.S. Federal Reserve’s job of tightening policy “is not done.”
Focus on ‘recession proof’ businesses
Demmert said investors should focus on “recession proof” stocks and “prepare for the new and upcoming bull market by making a list of great companies to purchase that will lead the market higher in the new business cycle.”
He said there are opportunities in healthcare, consumer staples, utilities and energy — sectors often viewed as safe havens in periods of volatility.
He is also beginning to look for opportunities in tech, given further declines in the sector recently.
Demmert top stock picks include:
Procter & Gamble. The company has been successful in retaining its profit margins due to its ability to pass on higher costs to consumers, said Demmert.
Danish pharmaceutical firm Novo Nordisk, the world’s largest producer of insulin. He likes the company for its “consistent earnings” and “excellent” recent quarterly profits.
T-Mobile. “It’s sort of an all-weather company at this point because they have the dominant exposure in that market globally. It’s well financed and has got a great balance sheet,” he said.
Demmert also likes some Big Tech names.
“You want to position yourself in... what does well when the economy recovers. And that means the better-quality tech for sure. Bull markets when they start, they are led by quality,” he said.
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