This week marks the end of a wobbly first quarter for the markets, and the next few months may see more shakiness, according to one market strategist.
The S&P 500 is now flat for the year after suffering a correction in the first few weeks. But Fed Chair Janet Yellen recently warned of risks ahead, with threats from potential slowdowns in China and energy. Making things tougher will be weaker earnings, said Quincy Krosby, market strategist for Prudential Financial.
And then there’s the calendar.
“As we go into April and then the six months following April, in terms of seasonality, it’s probably the most difficult time for markets,” said Quincy. “It doesn’t mean it always works out that way, but statistically, it does.”
However, she isn’t willing to throw in the towel just yet, because such pessimism may have a silver lining. “Many times the more negative you are, the better chances you have actually of having the market move up because of positive surprises,” Quincy said.
One sign would be if small cap stocks show improvement, according to Quincy. The Russell 2000, which tracks the small caps, remains down for the year.
“Janet Yellen gave the rally an undercoating of accommodation, of central bank largess; the ECB got involved and yet small caps have had a difficult time,” she said. “It’s a worry for the market that you don’t see them participating.”
Quincy sees the dollar’s recent weakness as helping to give a boost to industrial companies. She’s also positive on the consumer discretionary, consumer staples, and information technology sectors.
“Technology was the testosterone sector,” she said. “They’ve come to be seen as stable plays, companies that have very good cash flow and companies that are going to do nicely in a market that may not be as strong as you would like.”