Merely a blip or long-term problems?
Investors are grappling with mixed signals these days, and how they react to all the noise could have serious consequences for their portfolios, according to Bleakley Advisory Group’s Peter Boockvar.
Specifically, he said stocks suggest an economic slowdown is only temporary in this climate, while the bond market’s message is much more ominous.
“The stock market is assuming…things will improve in Q2 and throughout the second half,” he told CNBC in an interview Tuesday. “The bond market has a less-optimistic take on that, saying that the data is weak, and we’re going to reflect that right now in lower yields and inversions within the yield curve.”
An inverted yield curve, a condition in which short-term yields rise above their longer-term counterparts, is viewed as an accurate predictor of economic recessions. The closely followed yield spread between the short-term 3-month T-bill TMUBMUSD03M, -0.11% and benchmark 10-year Treasury TMUBMUSD10Y, -0.93% watched closely by economists, inverted back in late March.
For Boockvar’s part, the fixed-income market is the indicator to watch.
“The bond market is going to be right,” said Boockvar, who oversees $4.5 billion in assets as Bleakley’s CIO. “We’re in a slowdown that’s not just temporary, and I think that’s something that’s going to last throughout the year.”
As for this earnings season, he says that 70% of companies will beat estimates “because that’s always the case.” But that won’t sway him.
“I’m waiting to see the extent of those beats,” he explained. “And I think it’s more likely than not that we’re going to see a decline.”
Still, Boockvar is long stocks, albeit with a defensive bent.
“I have a bigger cash position of about 20%, north of 10% in gold and silver,”′he said. “A lot of the stocks I own are more value oriented. That obviously hasn’t been that helpful when everyone rushes to growth, but it’s a way for me to get somewhat defensive.”
Watch the full interview:
At last check, the Dow Jones Industrial Average DJIA, -0.04% was slightly lower, while the S&P 500 SPX, +0.22% and Nasdaq Composite COMP, +0.43% were in the green on Wednesday afternoon.
