Yahoo Finance Market is 'going to be lower for longer': Strategist
The market may be headed for a correction — and remain “lower for longer,” says Noah Hamman, CEO of AdvisorShares.
“We know there'll be some good news coming and hopefully a vaccine coming, but there's probably a lot of headwinds between company earnings and who knows what's going to happen between the U.S. and China as we get closer to the election cycle,” Hamman told Yahoo Finance’s The First Trade.
“We think it's going to be lower for longer. We're encouraging people to use hedging tools to take advantage of the opportunity,” he added.
The latest U.S. Labor Department’s weekly jobless claims report shows another 2.981 million individuals filed for first time unemployment as COVID-19 has shuttered and scaled down businesses.
On Wednesday the Dow (^DJI) and S&P 500 (^GSPC) and Nasdaq (^IXIC) all closed lower after Federal Reserve chairman Jerome Powell said the road to a recovery may take some time to gain momentum and called for more fiscal measures to avoid long term damage to the economy.
Much of the rally off the March 23rd lows has been driven by mega cap tech stocks, which has led some analysts to wonder if the narrow breadth in the market could mean trouble ahead for the bulls.
Hamman sees some stocks in the tech and communication services space fairing better than others in the months ahead - depending on their business model.
“I think if you have a subscription based model, so Disney+ (DIS), or a Netflix (NFLX), I think that helps if you're truly getting more subscribers and that's, you know, top-line revenue,” said Hamman.
”I think if you're a Google (GOOG, GOOGL) or a Facebook (FB), you might struggle a little bit more, relative to the advertising dollars that you're looking for and you're used to getting. Companies are going to spend less, they're going to get less,” he added.
“Even on the hardware side with an Apple (AAPL), probably slower upgrade cycles for phones and hardware. So you could definitely expect to see some challenges ahead for some of those tech companies,” said Hamman.
[Read More: Stock Market News Live Updates: Stocks fall after weak economic data]
‘Stay way from travel stocks for a while’
Some of the most badly beaten sectors by COVID-19, like airline travel are too early to nimble at says Hamman. He cites billionaire Warren Buffett who exited Berkshire Hathaway’s holdings in four major US airline stocks.
“It's just a category I would stay out of,” said Hamman. “I mean as sad as it is, one or more may not make it.”
He also says it’s too early to buy up cruise liners. On Thursday Norwegian Cruise (NCLH) swung to a quarterly loss though it sees demand rebounding by 2021.
“Would I get on one of those cruise ships anytime soon, and I wouldn't, it's more than just testing and a clean protocol. Once you're on that ship, you're kind of stuck,” said Hamman.
He believes people will be more inclined to go on cruises once there is a vaccine for COVID-19.
“Stay away from the travel stocks for a while. In fact, they’re some of the ones that we are shorting in some of our portfolios,” said Hamman.
Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre
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