‘Absolutely not’: Don’t chase the rally in stocks and bonds right now, investment manager says

The chief investment officer of Prime Partners said that investors shouldn't chase recent rallies in stocks and bonds.

Francois Savary said it was hard to have clear economic visibility due to the particulars of the current investment cycle.

He said that one of the key factors that supported the rally, which was a strong bond market during the month of July, has disappeared.

The second-quarter earnings season has been strong so far, but a key issue is how much analysts will revise their third-quarter earnings forecasts. Savary said that the two elements that can support a further rally in the equity market are not clear.

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Line chart with 250 data points.The chart has 1 X axis displaying Time. Range: 2022-01-01 00:00:00 to 2022-08-08 00:00:00.The chart has 1 Y axis displaying values. Range: 3500 to 5000.End of interactive chart.

He said investors shouldn't be chasing the rally in the stock market. The S&P 500 closed at 4,140 on Monday, but is still down since the beginning of the year.

It is very difficult to make money on bonds. I wouldn't chase the bond rally that we experienced.

Money flowed into corporate, government and high-yield bond funds. The U.S. 10 Year Treasury yield, which moves in the opposite direction of prices, has fallen to trade around 2.5% on Tuesday.

There are a lot of inflationary pressures, recession risks and central bank tightening cycles that investors in global markets are having to navigate.

Savary told CNBC that the market is difficult. There needs to be some kind of decorrelating strategy in your portfolio.

He said that keeping some investment in stocks would give partial protection from inflation.

Cash is useful for flexibility.

Everything is possible if you have some cash to check. He said that we could have a recession but also a slow but satisfactory rate of growth in the coming year.

The market has priced in a recession. The numbers are not telling you that there is a recession, so we should have more visibility by the fall in the U.S.

The U.S. economy fell for the first two quarters of the year, but the White House insists the country is not in a recession.

The state of the world's largest economy will be looked at by investors when U.S. inflation data is released on Wednesday. The jobs report for last month showed surprise strength and increased expectations of a rate hike in September.