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Correction in many stock markets has been late, but strong fundamentals and firm earnings make the current wobble a buying opportunity, according to Mehvish Ayub, senior investment expert at Global State Advisors.
Wall Street recovered what it lost Tuesday after U.S. Federal Reserve Chairman Jerome Powell said inflation remained “soft” and pledged by the Fed’s current accommodation policy.
Powell’s comments seemed to accept some of the concerns about upcoming inflation that have sharply boosted U.S. 10-year benchmark yields, and pushed stock markets down from rising highs. near a high over the past week.
Investors have been worried that a spike in prices as a result of an upcoming federal stimulus package, rising economic regulation and consumer demand could force the central bank into short-term lending costs. built.
Speaking to CNBC’s “Capital Link” on Wednesday, Ayub noted that the shift in financial conditions and an improvement in growth and inflation expectations had reversed the 10-year U.S. output just as part of the steep decline. saw it between December 2019 and June 2020, when the Covid-19 crisis took hold.
“I think the important thing to note is that the Fed has not proposed anywhere in its policy that it will eliminate all financial conditions. It has a target for price stability and for employment, “Ayub said.
She noted that core inflation – which keeps food and energy prices at bay – remains slightly lower, indicating that the current rise in short-term inflation expectations is likely to be stagnant. . “
“We were ripe for correction in some situations, if you consider the pace and magnitude of the trends we’ve seen across global equity markets,” Ayub said. A correction is usually referred to as a 10% decline in an asset or market from its most recent high.
Many of the tech megastocks that have seen rising stratospheric share prices power the stock market recovery after the March 2020 recession, have suffered the recent trend, with investors looking to towards a more volatile stock that tends to align with economic conditions.
Mikhail Zverev, head of global shares at Aviva Investors, told CNBC on Wednesday that many of these growth stocks – those of companies operating with a stable and stable cash flow, with increased future earnings and futures -incurrently growing faster than business peers – has benefited from the low interest rate environment
“There are a number of high-growth names that had an amazing 2020, and some of that was certainly fundamental, but a lot of that was based on the minimum for a longer flat rate view, and some are reluctant to do that. do, I think, late. “
Tesla was one such example, losing 8.55% Monday for the worst day since September 2020 and leaving the stock down slightly from the turn of the year. Tesla shares are still up 162.5% from their March 2020 low, however.
“Over the last few weeks, if we have anything we’ve had some really good foundations,” Ayub said. “We’ve got some really good earnings, especially if we look at the S&P 500.”
With about 80% of companies on Wall Street’s blue-chip index reporting earnings at this rate, the majority have met or exceeded profit expectations.
“The foundations there are still good, and if anything, I think this is an opportunity to buy on the dip,” Ayub concluded.