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Even if the May pullback lingers until summer, Cresset Capital’s Jack Ablin plans to embrace it.
He believes market and economic fundamentals are intact, and a U.S.-China trade deal isn’t essential to keeping the bull market alive.
Ablin cites liquidity —the ability and desire to borrow, spend and invest money — as a critical driver for more record upside.
“As long as lenders continue to want to extend credit and spreads are low and lending is still reasonable, then I see no reason why we couldn’t just get away with say a 10% correction or something – certainly less than the bottom that we saw back at Christmas time,” the firm’s chief investment officer said Thursday on CNBC’s “Futures Now. “
Ablin, who oversees $4.2 billion in assets under management, predicted a “sloppy” year for stocks on the program in February. He cited trade policy as the most likely source for a major sell-off.
“There could be tariffs especially with China that are persistent that actually never go away,” Ablin said on Feb. 19. “That’s something I think investors aren’t banking on, and I don’t think they’ve calculated it into the current pricing.”
Yet, he was confident investors could still generate solid profits. And, that hasn’t changed with the latest downturn where the S&P 500 is coming off its worst week of 2019, losing more than 2% of its value.
Ablin’s market strategy
To navigate the uncertain atmosphere surrounding trade, Ablin prefers a barbell strategy over a focus on S&P 500 sectors.
“We’ve taken positions in small cap and in emerging markets. What the logic was small caps will generally do better than large caps if there are increased trade tensions, ” he said “At the same time, emerging [markets] will likely do best if they [the U.S. and China] do reach an agreement that there aren’t massive trade tariffs and that economic growth continues on a reasonable track.”
According to Ablin, the S&P 500 should close the year as much as 8% above current levels. He believes next year will also be a winning year for investors.
“I take some comfort in President Trump’s petulant nature,” Ablin said. “At some point during the course of 2020, he is going to need the stock market to rally. He is going to have to demonstrate that he’s making progress in the economy going into that re-election season.”
Disclosure: Cresset Capital has positions in small caps and emerging markets.