Stocks aren't in the 'bargain bin' after the pullback: Expert

US stocks (^DJI,^GSPC, ^IXIC) are looking to recover after mixed economic data and cooling in August's jobs print last week triggered a sell-off. Gradient Investments senior portfolio manager Jeremy Bryan joins Wealth! to break down the outlook for equities and how investors can best navigate the current state of the market.

"Stocks certainly are not in the bargain bin yet... I can't argue for that at all because we're at elevated valuations still at this point from the S&P 500 as a whole. And we're still up over in the double digits for the year so far, even though we've come down here a little bit," Bryan says of the most recent pullback.

For investors looking to get into the defense sector, he points to stocks like Northrop Grumman (NOC), L3Harris (LHX), and the RTX Corporation (RTX). He argues, "Those companies are at reasonable valuations already... they have different trajectories and they should be OK given the current environment."

When it comes to investing in chip stocks, Bryan encourages investors to examine their portfolios and weigh the risks they're willing to take. "I'm not saying the AI stocks are bad. In fact, we own plenty of them here, but we don't own them to the extent that even the S&P 500 has them. We're underweight Nvidia (NVDA). We're underweight Apple (AAPL)," he explains. He notes that now may be a good time for investors to take profits from their overexposed positions and reinvest in other areas of the market.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl

Video Transcript

U BS actually noting within their own release this morning saying and talking about how us equities are falling on that mixed us jobs data.

And they put within that publish here that the weaker pace of job creation rather than more encouraging aspects of the report such as a decline in the unemployment rate that actually uh had really had more of the outside effect that, that we've been discussing here in the event that we do see continued jitters off of not just what the employment situation is telling us, but perhaps what shows up in CP I later this week, where are those dips and those dip buying opportunities from your perspective as you're kind of looking across where the market could continue to have some unease around the economic data readings that do come out.

Yeah, I think, you know, I mean, stocks certainly are not in the bargain, but yeah, I mean, there's just no, I, I don't, I, I can't argue for that at all because we're at elevated valuation still at this point from the S and P 500 as a whole and we're still up over, you know, in the double digits for the year so far, even though we've come down here a little bit.

So from that perspective, we could see further declines, but I would say anything in that true correction territory that 10% plus correction from all time highs, I would be looking at that and saying, ok, are there anything that has been overreacted during that time as potentially the opportunity to gain up going forward in this time right now?

You know, I mean, if people want to play defense, I think there's no better place to play than defense right now, you know, defense stocks like Northrop Grumman, like L three Harris, like Raytheon, those companies are reasonable valuations already and their growth profile isn't subject to these things that we're talking about is that they have different trajectories and they should be ok given the current environment.

And so as you're leaning further into defense, where would you be taking chips off the table?

Yeah, I mean, look at, you know, what I would say is you have to examine your portfolio in and of itself.

And how much risk are you taking in some of the stuff is that we saw massive chasing of the A I stocks, right?

And I'm not saying the A I stocks are bad.

In fact, we own plenty of them here, but we don't own them to the extent that even the S and P 500 has them.

We're underweight NVIDIA, we're under way out these kinds of things just from a perspective and saying their weight is so significant and they've had such a, such a significant rally that that's an area where I can take some profits from to relocate them into other areas.

Jeremy Bryant, who's the senior portfolio manager over at gradient investments.

Great to kick off the week with you.

Thanks so much.

Thank you.