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Fund managers may buy selective US stocks in case of downside

The rally in the US stocks may have lost its steam after reaching a peak of over 21,000 in early March

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Gulf News

Dubai:

Fund managers may resort to selective approach incase of any correction in US stocks.

The rally in the US stocks may have lost its steam after reaching a peak of over 21,000 in early March, and analysts are looking at the first quarter results to find out if companies under perform the expectations of the asset managers.

“The first quarter results will have to significantly surprise on the upside to justify the valuations that we see today.

I don’t expect bad or even extra-ordinary results. The valuations are expensive today. I don’t see a major positive or negative surprise, I expect good steady growth. That could be trigger and the focus in coming weeks,” Nadi Bargouti, Managing Director, Head of Asset Management at Emirates Investment Bank told Gulf News.

When asked, if he would be a buyer in case of a correction in the US markets, Bargouti said, “It depends on how the correction is. We would be buyers on dips, but we would be selective, and would be in names that we like. We would be cherry-picking in the names with healthy balance sheets.”

National Bank of Abu Dhabi has resorted to profit-taking by reducing overweight positions in US and European equities, purely on a tactical basis.

“On technical grounds, looking at the S&P 500, for instance, the index is now looking extended relative to its medium-term moving averages, and while the latter continue to rise and be supportive, we still believe a market correction is likely,” said Claude-Henri Chavanon, Managing Director, Head of Global Asset Management in a note.

“Although believing a moderate correction is overdue in developed equities markets, we remain constructive regarding risk assets,” he added.

Analysts offered mixed view on the dollar.

“We still have a positive view on dollar after an increase in rates,” Bargouti from EIB said.

The dollar has been trading in the vicinity of the lowest level in six weeks, after the greenback gained 5 per cent in the past one year.

However, UBS feels that the greenback will move to a less overvalued territory.

“We think the Fed will allow inflation to climb faster than they raise rates. Increasingly negative real interest rates coupled with the US’ current account deficit may undermine the dollar’s appeal,” Max Kunkel, ultra high net worth investment strategist at UBS Wealth Management said.

The Dollar index has gained 2.6 per cent since Trump was elected in November.

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