The Federal Reserve has taken the necessary steps in stabilizing stocks, and the market is now in a “much better place” than it has been for some time, Chris Harvey, head of equity strategy at Wells Fargo Securities, said Wednesday on CNBC’s “Trading Nation.”
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The coronavirus has yet to be resolved, but there are initial signs its devastation has peaked in Italy and “perhaps” even in New York City, Harvey said.
The timing comes just one week ahead of the first round of earnings reports, which Harvey said will still be “difficult.”
Over the next few days and weeks, Wall Street’s earnings estimates are likely to come down “dramatically,” but this shouldn’t necessarily deter investors from buying stocks at current levels, he said.
Investors shouldn’t shy away from seeking opportunities after the recent “destruction” in stocks, the strategist said.
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Harvey: Avoid Travel, Leisure Stocks
The hard-hit market has created “opportunities across the board,” and selective investors can find “significant amounts of value,” Harvey said.
But these opportunities are limited to industries that can show longer-term growth backed by a clean balance sheet, he said. Most notably, the strategist said investors should focus on REITs, semiconductors and industrial stocks.
Sectors that should be avoided include travel and leisure, especially cruise stocks, he said.
Investors shouldn’t “light their hair on fire” at current levels, but rather identify names with compelling risk-reward profiles, Harvey said.
Perhaps most important, investors should keep in mind that we are still in a “difficult cycle” and at the early stages of a recession, he said.
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