Dow closes out best quarter since 1987 – investors weigh in on what comes next

The Dow Jones Industrial Average just wrapped up its best quarter since 1987.

Four experts discuss what they’re looking forward to for the rest of the year.

Gabriela Santos, global market strategist at J.P. Morgan Asset Management, is avoiding extremes in her portfolio approach.

“We are in a much better place right now than we were at the end of last quarter. We started the recovery with two strong months here of the recovery in data for May and June. And we also have a lot of policy support on both the monetary and the fiscal side. So the conversations we’ve been having is to start to take a bit more risk in the portfolio, being a bit overweight equities versus bonds, starting to think about cyclical sectors and regions within equities, starting to think more about corporate credit on the bond side. But at the same time we’re also thinking [that] the second half is not going to be easy so we want to avoid the extreme of going to overweight risk.”

Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School, sees a big milestone in store for the Dow so long as a few scenarios play out.

“I point out the fact that the 31% increase in the money supply is the greatest we’ve ever seen since World War II, far in excess of what we had during the financial crisis, 2008-2009, and this liquidity is just waiting to burst on to the economy if we can get people’s confidence back. If the virus subsides, get some more therapeutics, get some more confidence in the economy, and if the Republicans can hold the Senate, we will see I believe Dow 30,000 by the end of the year.”

Daniel Niles, founding partner of AlphaOne Capital Partners, sees opportunity in some stay-at-home stocks. 

“The market has obviously had a tremendous run. Valuations for the market are at all-time record highs by some measures like market cap to GDP, and so the names that we’re sort of focused on are ones that still have interesting things in front of them, such as the gaming companies. We’ve got the first brand-new consoles from Microsoft and Sony out this year for the first time in seven years. So we like Activision and Take-Two, names that have done well during this crisis as people stay at home and play video games.”

Jim Lowell, chief investment officer at Adviser Investments, warns not to get caught up in the “FOMO” trade nor the rush to value. 

“It still is data that’s going to be highly suspect and completely codependent upon the trajectory of the medical data, positive or negative, so we do think that it’s important to stay disciplined, diversified across asset classes – stocks, bonds, cash matter. Trying to chase based on the fear of missing out – tech highs – we think would be a fundamental mistake. We also think it would be a mistake to chase deeply discounted lows on the value side. They’re cheap for a reason, likely to remain so for quite some time.”

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