The latest economic data, from initial jobless claims to retail sales, has quelled investor fears of a recession after the July jobs report triggered a three-day market sell-off. Bank of America Securities senior US equity strategist and head of US SMID-cap strategy Jill Carey Hall joins Market Domination to analyze the current state of the market and some of the best plays ahead of more volatility. “This is an environment where investors want to be selective. We don’t necessarily see more upside to the S&P 500 (^GSPC) index level. We’ve had a 5,400 year-end target. I think this is an environment where you want to pick your spots within the market,” Carey Hall explains. She notes that Big Tech capital expenditure spending is high while earnings are starting to slow, a trend she expects to continue as the other 493 stocks in the S&P 500 start gaining momentum. As the Federal Reserve begins to cut interest rates, she points to equity income stocks and dividend stocks as areas of opportunity. However, she warns of a bumpy road ahead, saying, “volatility is going to be likely during this seasonal period,” especially as the VIX (^VIX) typically rises about 25% from July to November in presidential election years. She adds, “We’re also in an environment where, based on the slope of the yield curve, that’s typically been a good predictor of what happens to volatility with a leading relationship. So that was also suggesting we could see volatility move up off of lows starting in the second half of this year.” Carey Hall highlights that 5% pullbacks in the S&P 500 happen three times a year on average, with the last one having occurred in April. “All in all, I think it’s an environment where volatility could continue in the near term and selectivity within the market makes sense,” she tells Yahoo Finance.
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