Bear markets come in three stages; and we’ve just started the second one, says the veteran analyst.

Stocks to start the Black Friday mid-session near 10-week highs after bouncing in part on hopes the Federal Reserve slows the pace of interest rate hikes while waiting to see how much earlier tightening has impacted on the economy.

Investors are therefore looking forward to when the Fed eventually pivots and borrowing costs can start falling again. For now, they are showing little concern about the damage an economic slowdown could do to corporate earnings.

It’s all too rosy, believes Peter Boockvar, chief investment officer at Bleakley Financial Group. In an interview with Magnifi+, an AI trading and investment platform, the veteran analyst warns that stocks will fall to the downside next year, and we haven’t seen the bottom of a bear market yet in its mid-stage.

“Bear markets usually happen in three phases. The first is that we take many of the frothy excesses and sexy name euphoria out of the market that we saw in 2021 and reduce the PE ratio. We did, we went from 22x earnings, let’s call it 16 to 17,” says Boockvar.

In the second phase, he adds, investors begin to calculate the economic and corporate income consequences of the continuous rises in interest rates…”and then in the third phase everyone throws in the towel. No one wants to own a stock again, and that’s your fund and that’s when you need to buy stock with your bare hands.

“I feel like we’re really just starting to start that second phase,” she said.

However, there will be opportunities. It all depends on your timescale, according to Bookvar.

“If you have a big purchase to make within the next year or two, whether it’s a boyfriend going off to college or a wedding, a bar mitzvah or some other expense like a house you’ve set aside money for, it should not be in the stock market. It should be in the bank. It should be in short-term Treasury bills. It should be in cash equivalents because the next couple of years are going to be tough for those with short-term time horizons,” he said.

So, what resources is he interested in? Bonds are attractive, but it’s important to stick with quality.

“You have investment grade bonds that yield 6%, and you can do that without taking much maturity risk by buying short-term maturities… And you can buy a two-year short-term treasury and get a four and a half percent yield and also take some attractive Munis. So fixed-income lands, with shorter terms, I think, are more attractive. Long-term commercial terms, I’m even more suspicious,” says Boockvar.

And in actions? “Value stocks are much more attractive than growth, technology stocks. I think commodity stocks are much more attractive than they have been over the past five years. Certainly energy, precious metals, even industrial metals such as copper stocks.

If the dollar has peaked and retreated as the Fed nears the end of its hike cycle, Boockvar likes the look of overseas markets, particularly in Asia, and gold and silver once the central bank starts cutting rates.

Finally, the only thing he certainly doesn’t like is the technicians’ former loved ones. “Just buy Google GOOGL,
-0.42%
and Amazon AMZN,
-0.70%
and Apple AAPL,
-1.95%,
while they are all large companies, that ship has sailed and the baton in terms of market leadership will have passed to other parts of the market,” says the analyst.

Markets

Shares were in line to start the last trading of the week on the front lines, with S&P 500 ES00 futures,
-0.07%
up 0.2% to 4039 and 10-year Treasury yields TMUBMUSD10Y,
3.726%
they were little changed at 3.709%. U.S. crude futures fell 0.7% to $79.50 a barrel.

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The buzz

It’s half a day of trading for Wall Street as many traders extend their Thanksgiving break as well. Expect very thin volumes.

However, analysts and investors are looking for guidance on how Black Friday sales are doing. How is the US consumer weathering high inflation and steep increases in borrowing costs? Stocks in Amazon AMZN,
-0.70%
and WalmartWMT,
-0.14%
they were relatively stable.

Tesla shares TSLA,
-0.96%
they rose about 2% in pre-market shares despite news that the automaker is recalling about 80,000 cars in China.

Activision Blizzard shares ATVI,
-3.69%
they are down more than 3% after a report on Wednesday that the Federal Trade Commission could block Microsoft’s purchase of the video game maker.

The Fed’s Bullard got down to inflation and interest rates in a MarketWatch Q&A on Monday. Sign up here to watch the program and ask a question.

China’s central bank has eased monetary policy as the country struggles with further outbreaks of COVID-19.

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The graph

Here’s an interesting observation on stock volatility from Benedek Vörös, director of Index Investment Strategy at S&P Dow Jones Indices.

“It’s been a turbulent year, but a certain calm has returned to the US stock markets in recent weeks and participants in the options market seem even more relaxed than their cash counterparts,” writes Vörös in his latest bulletin. “VIX, having averaged 3 points above the 21-day realized volatility of the S&P 500 over the past year, slipped 6 percentage points below it as of yesterday’s close. Historically, this has had some predictive power for less volatility to come.”

Source: S&P Dow Jones Indices

Better tickers

Here are the most active stock market tickers on MarketWatch at 6:00 am Eastern.

Tickers

Security name

ATS,
-0.96%

Tesla

GME,
+0.94%

GameStop

AMC,
+0.66%

AMC entertainment

NIO,
-4.83%

NIO

COSM,
+34.00%

Cosmos holdings

AAPL,
-1.95%

Apple

APE,
-0.89%

AMC Entertainment preferred

BBY,
-0.59%

Bed Bathroom and beyond

AMZN,
-0.70%

Amazon.com

MULNO,
-4.73%

Mullen Automotive

Random reads

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