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The market (^GSPC, ^IXIC, ^DJI) is currently grappling with trade war uncertainty. Truist co-chief investment officer and chief market strategist Keith Lerner joins Market Domination to discuss his market outlook in the face of a potential recession and long-term market shifts.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
And I know that you took a step back back in February. And you said, you know what, maybe we should be a little bit neutral here. I'm I'm curious at that point, what was sort of the catalyst for you and are you still sticking with that neutral kind of view in the face of what's been going on?
Yeah, well, hey, great to be with you, Julie. Um, you're right, back in February, um, when we look at the the way of the evidence in our work, it just suggested that the risk reward had deteriorated, um, from where it was prior where we had been very bullish. And some of the things we have looked at is we already started to see the economy cool somewhat, even before this tariff news. Uh, we had gone the longest stretch uh, of this bull market without even a 5% pullback. That told us that we were were vulnerable. We started to see earnings flat line um, somewhat. At the same token, when stocks made new highs in February, only about um, or when the S&P made a new all-time high, only about 50% of stocks were making new highs. So we put that all together ahead of all this event risk. We just thought the market was being somewhat complacent. So that's a that's I guess maybe answer to the first part of your question. The second part of your question, our overall strategy is is somewhat still somewhat more neutral, but the main thing we're talking to our clients, our advisors today is that we would not be selling into this panic that we're seeing short term. At least now you are starting to discount some of these uncertainties, not saying that this is the end of the decline, but what we're also saying is that that we should be thinking about two-way risk. Not just risk to the downside, but there's also risk now to the upside. So it's become a bit more favorable than I would say where it was in February where again, we weren't pricing in any risk at that point.
Keith, how are you? It's Kenny Polcari. Let me ask you a question about um, targets. Now that we broke through 5,000, earlier today, we were trading in 49, I think 4975-ish. I I don't, I think that was a low, might have been a little bit lower. But now that we've broken that kind of psychological 5,000 level, depending on where we close tonight, um, where do you see it in short term? Do you see us testing potential a little bit lower because I view that, you know, we're not going to have this V-shaped recovery, things aren't going to rally right back, that we're going to churn for a little bit and maybe just churn a little bit lower. I don't think we're going to have these, you know, down five and 6% days like we just had for the last couple of days. I think it's kind of stabilizing and there are some big name stocks that are actually becoming a value play.
Yeah, well, great to see you, Kenny. Uh, so we actually put a note out last night and what we were referencing, more importantly, is the uh, is around the 4,800 level on the S&P. The uh, 4,800 level, uh, is the uh, 50% retracement of the 2002 to 2025 bull market. So we look at that uptrend to the recent pullback, it's almost a perfect 50%. That that level, that roughly 4,800 level, uh, also overlaps with the highs from 2021. So so that's exactly where we stopped today. We're at 4835. So I think that's the important near-term level, Kenny, and in our work. And then the other thing I would say, too, is that uh, about the volatility, we we put out a note last night uh, looking around at these big two two, um, down days in a row. And what the work clearly shows is that volatility tends to cluster. And what's also notable, within the next two weeks, you go from having one of the worst two down days to having one of the best two up days. Meaning, it's not unusual to see, you know, some type of rally in the in the, you know, 9%, 12% at some point over the next few weeks. It may come up from different levels. So to your point, we I actually think that we will see some pretty choppy action. What happens after that shock period, you have this battle between fear and greed. Fear that we have more downside, so people looking to sell and those that are more greedy or looking at opportunity to buy. So we create this kind of back and forth, which I think is is likely to continue here in the near term.
