According to a Wells Fargo investment chief, it's time for investors to get defensive and jump out of stocks that are in the middle of a bear market rally.
Even though the S&P 500 has climbed more than 15% since hitting a low for the year in June, Darrell Cronk is skeptical about how well the stock market will perform over the next four years.
The question is, is this a bear market rally or a new bull? Cronk works for Wells Fargo Wealth and Investment Management. We think this looks like a bear market rally.
The bear market rallies get larger as the market gets older. We've had six S&P 500 rallies during this bear and this is the largest one we've seen.
He thinks the recent rally in the S&P 500 isn't sustainable because the US benchmark hasn't broken above its 200 day moving average since April. It is seen as a change in long-term direction if stocks rise or fall through this resistance level.
Cronk suggested they shift away from stocks and into less risky and volatile markets such as bonds or cash.
The Federal Reserve is on the verge of stopping its interest rate hikes, as well as housing market forward indicators hitting a bottom, according to the CIO of Wells Fargo.
He said that you have to be close to the Fed being at or near their last interest rate hike. We believe we're at least six months away from that.
Cronk said to play defense from a risk perspective.
Some investors think the Fed will cut interest rates soon. The US central bank's current hiking cycle won't end until at least 2023, according to Wall Street strategists.
According to analysts at Goldman, Bank of America, and HSBC, the Fed will likely continue to hike until the nominal rate is 4%.
Wall Street warns investors not to try to time the bottom of the stock market.
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