Date: Wed, 20th May 2020
Author: Ines Ferre
Strategist James McDonald, CEO of Hercules Investments expressed that investors may identify fruitful opportunities with technology and ‘serendipity’ stocks in the long haul.
McDonald told Yahoo Finance’s The First Trade, “This is a wonderful time to invest, right now, the leaders in the S&P 500 (^GSCP) are no longer oil companies and big industrial companies. They are tech companies that are sitting on hoards of cash.”
The market’s recent rally off the March 23 lows has been fuelled largely by mega-cap tech stocks. He added, “Not only does it [tech] look wonderful, but they have the economic power to survive whatever happens with this market sell off. So, if you want to buy, you gotta do tech.” Macdonald also added, “There's a concept called serendipity, right? No one saw this virus coming, but there's companies positioned to take advantage of it.”
He pointed out on companies such as Walmart (WMT) and Netflix (NFLX) being able to benefit from the lock down measures as people are frequently placing orders online, stocking up essential items and watching long hours of streaming content. McDonald also mentioned opportunities of investments in health care, keeping in mind, those plays involve more speculation.
On Monday, Moderna (MRNA) surged more than 24% on encouraging data about its experimental COVID-19 vaccine. Similarly, Sorrento Therapeutics (SRNE) had also skyrocketed after announcements of positive developments related to its anti-body therapy for COVID-19.
‘A coordination of monetary policy and a coordination of health policy that will bring us back’
On Monday, the major averages rallied after Fed Chair Jerome Powell reported the central bank is not out of ammunition to help the economy recover from COVID-19. Fed Reserve actions and government stimulus have lifted the markets but McDonald warns the central bank will ease off those measures by the first quarter of 2021.
“When they get to the edge, when they get to the limit of where they can no longer inject liquidity, they'll pull it off.” “The Fed does not have an unlimited printing press, but it does have time on its side,” said McDonald.
He added, “People are working hard to get a vaccine, people are working hard to understand how to contain this from a social distancing standpoint ... And so, it's going to be a coordination of monetary policy and a coordination of health policy that will bring us back.”
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