Markets will 'chop sideways' into year-end: Strategist

Piper Sandler chief investment strategist Michael Kantrowitz joins Market Domination to discuss what investors can expect from the third quarter earnings season ahead. "I think we're going to see more of the same, which is that larger companies earnings will continue to be more or less resilient led by the larger companies. Not just seven stocks, but just in general, companies with better economies of scale and more efficiencies," Kantrowitz explains."And on the flip side, when we look at mid-cap stocks or small-cap stocks, we believe we'll continue to see their earnings disappoint. And we'll see that through expectations for earnings for 2024 and 2025 to continue falling. For this year, 2024, earnings are now expected to fall below 2023's earnings..." Since unemployment has climbed while inflation has fallen, Kantrowitz believes there is "not much more PE expansion [Price-to-Earnings] left for equities." He expects markets to "chop sideways" throughout the rest of 2024. He adds that the stocks that will outperform are going to have to "earn their returns" and "see better earnings revisions," which investors should keep a close eye on. He points to larger-cap tech names like Netflix (NFLX) and Meta Platforms (META) and industrials such as Wabtec (WAB) and Trane Technologies (TT). As the election lies less than two months away, Kantrowitz does not believe investors should strategically position their portfolios. "Our policy team still think that it's a coin toss in terms of who's going to win. And I think ultimately when our policy team polled clients, the answer for the best market backdrop that they said would be a Harris win with a split Congress. So not getting any kind of some of those more extreme tax hikes, corporate, personal, and with Trump not in office, not getting huge tariff increases, which he could do unilaterally."
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