- Up more than 20% from its 52-week low, the Nasdaq is technically in a bull market.
- However, David Dietze, managing director of Peapack Private Wealth Management, said this is not the case as the tech index is still 30% below its peak and the S&P 500 hasn’t even made a big move higher.
- The expert recommended continuing to invest in the stock market but in small-cap companies and warned that the gains from technology stocks could soon be wiped out.
The stock market closed the first quarter in the green with the Nasdaq up more than 20% from a 52-week low, which technically means it is in an uptrend.
This excited investors who kept betting on tech stocks, Bitcoin and gold as Wall Street grappled with a banking crisis.
However, David Dietze, managing director of Peapack Private Wealth Management, indicated that the market is getting ahead of itself and that this is a dangerous thing to do.
“In that sense, we are a long way from a new bull market, as the Nasdaq is still almost 30% below its high, while the S&P 500 is down just under 15%,” he emphasized.
“Inflation is the number one problem. That keeps interest rates high, the [Federal Reserve] is aggressive, and it makes consumer spending more difficult. Higher rates make high-value items more expensive for consumers, companies’ capital expenditures are more expensive, and at the same time make bonds more competitive relative to stocks.”
Dietze.
What to do in this context
The expert was very clear that investors should continue to bet on the stock market, noting that interest rates can go down as fast as they went up in the short term.
He also added that it is better to invest in small-cap stocks because it is a sector that has a history of outperforming. That’s why he named three companies to watch: Western Alliance Bancorp for its low 25-year valuation and abundant cash flows; Comcast for its “generous” stock buybacks and dividends and Boston Properties.
Lastly, he suggested that investors stop buying some tech stocks like Google and Microsoft that went up for virtually no reason.