For Slimmon, the beat-down in consumer sentiment has gone far enough to warrant betting on a turnaround.
“There’s a very low expectations in those stocks right now. What if the direction of change is actually higher for consumer sentiment?” he said. He views the risk-reward as attractive.
“Those stocks might recover dramatically because they’re down so much.” He plans to snap up shares “well into the weakness” in August, which is among historically the worst months for equities as volumes are thin and workers are on vacation.
Stock market moves during this period are usually dominated by macro events. “The macro story this year is not very good,” he said, citing a global geopolitical crisis and the lack of an August meeting among Fed officials.
“The focus of the market shifts from what ultimately long-term drives stocks, which is earnings. And when the shift goes to other things like macro events that creates volatility.”
As for those areas he will likely stay away from, he offered two sectors. “If you think about what’s worked year-to-date on a relative performance basis, there are two groups that have really done well: energy and defensives,” he said. “It’s a little late to be selling the energy stocks. They’ve been so creamed. I wouldn’t be aggressively buying those stocks.”
Many investors are anticipating the Jackson Hole conference in August will be a time for central bankers to declare the peak for inflation is in. The most risk tolerant traders are initiating long positions today to ensure they have the cushion of rebound ahead of that event. There is clear scope it will be a buy the rumour and sell the news event if central bankers fail to deliver.Click HERE to subscribe to Fuller Treacy Money Back to top