For investors, 2022 has been a year plagued with seemingly constant market volatility. To help investors better navigate this challenging environment, CNBC recently turned to Axonic Capital Director of Research Peter Cecchini for insight on the potential opportunities and challenges ahead.
“I’ve been bearish since late last year and the thesis was that the Fed was going to have to pivot and react on exactly what we got, which was persistent inflation,” says Cecchini. Looking forward, he believes that the equities market moving forward remains not as promising as other experts may lead on.
“While this earnings season wasn’t horrible on its face, the beat percentage is not exactly a good gauge of where things are about to go,” Cecchini explains. “When piling that on top of the fact that you can get a 4% yield on investment-grade corporate credit, and the earnings yield on the S&P 500 is about 5% with the prospect of margin compression, that’s not a great picture or set-up for equities.”
Further, Cecchini explains that a future equity sell-off may lead to lower 10-year yields at some point as the year progresses. “From here tactically, I think the market is quite oversold and positioning is extremely bearish. From here, I would actually expect a rally in the broad indices. But I am a seller of those rallies,” he concludes.
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