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Investor Boockvar Urges: Brace For Summer Sell-Off

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EDITOR NOTE: Investors appear to be getting accustomed to the uncertainty that’s shaping the context of today’s stock market. The split between optimistic sentiment and not-so-great economic news may be blatant, but that’s not preventing the retail crowd from jumping in. Aside from these uncertainties, however, we still have the matter of valuation that’s less fuzzy and more measurable. According to the article below, the market is still “extraordinarily expensive”; much of the overvaluations bubbling up in the Tech sector. The author’s conclusion: a whopping 10% drop in the summer, led by Tech. But where does that leave investors in terms of opportunity? Quite a few, in fact. And gold and silver are in the mix.

Investors may want to curb their enthusiasm for the market rally.

The Bleakley Advisory Group’s Peter Boockvar warns stocks are vulnerable to a 10% or more summer sell-off.

“That’s when the gut check is going to take place,” the chief investment officer told CNBC’s “Trading Nation” on Wednesday. “Right now, the market is ignoring all the bad news in the hopes that things obviously get better as we reopen.”

Over the next couple of months, Boockvar suspects the market will trade sideways. Once most of the economy reopens, that’s when he warns a wave of profit-taking will likely strike stocks.

“The market is extraordinarily expensive. Now, we have to bifurcate that because a lot of that overvaluation is concentrated in technology,” he said. “Because technology is huge chunk of the S&P [500], it makes the overall valuation metrics pretty high.”

The Technology Select Sector SPDR Fund, the ETF tracking S&P 500 tech stocks, has soared 46% since the March 23 low. It has outperformed the index by 7% in that time frame. 

Plus, the tech-heavy Nasdaq closed above 10,000 for the first time ever on Wednesday.

Boockvar acknowledges unprecedented Federal Reserve stimulus policies are a major driver of the rally. But he adds the upside has also been driven by a premature assumption that the coronavirus pandemic has turned a corner.

“When you shut down, you cause yourself your own pain. When you reopen, obviously things get better,” he said. “Come August [or] September, when most things are reopened... that’s when we’ll be able to sort of fairly measure the state of the economy.”

According to Boockvar, it’ll be difficult to determine the scope of the recovery until local barber shops, clothing stores and other businesses reopen — as well as how many employees actually return to their jobs and consumers’ intentions to spend.

Despite his pullback position, Boockvar still sees pockets of opportunities.

Boockvar’s main strategy, which focuses on unloved areas of the market, is to find groups that may benefit from an inflation comeback later this year or next year. He expects prices to rise due to the increased cost of doing business in a post-coronavirus world.

His picks include oilgoldsilvercopper and fertilizer stocks.

Originally posted on CNBC

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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