Markets have been very rocky lately, but Morgan Stanley Investment Management’s Andrew Slimmon has an idea of how they could go from here. He says the market could “be consistent with 2023,” after much volatility in the past few weeks. In late July, both the S & P 500 and the Nasdaq dived to a low not seen since 2022 before rebounding. Global markets — including the U.S. — sharply sold off last week before bouncing back this week. After the sell-off in August, markets could have a “recovery rally” in mid-September, before tumbling “another leg lower” and bottoming in October, Slimmon said. He said markets are in the recovery rally phase at the moment as the most recent inflation numbers are “benign” enough that the U.S. Federal Reserve can be assumed to be cutting rates in September. Slimmon, who is senior equity portfolio manager at the firm, explained that in the first half of the year, markets were rewarding companies with the best earnings revisions. Those winners got hit the most in the sell-off in July and August — but there’s a “great opportunity” to now revisit them. “And maybe that’s some of the AI plays that were red-hot in June … So I think you were in a period of time here where the market’s in a dicey shape,” he told CNBC’s ” Squawk Box Asia. ” “But I think going into the fourth quarter, you want to own the stocks that were winners the first half of the year, I think they’ll come roaring back. And I think that will be good for active management.” Slimmon manages the Morgan Stanley U.S. Core Fund and the Morgan Stanley Global Core Fund. The former has gained 18.03% year-to-date, beating the S & P 500’s 14.89%. The latter rose 14.68% in the same period, outperforming the MSCI World index’s 11.54%. Despite the swings, Slimmon believes that the S & P 500 could dip lower a month from now, but ultimately get “closer to” 6,000 by year-end. The index closed at 5,543.22 on Thursday. “I’m trying to sort through companies that have had the best fundamentals, that have sold off recently and trimmed back … So there is an opportunity to what I would call fundamentally grade up your portfolios into companies that are showing the best earnings revisions, the best fundamentals,” he said. “This could be a tough time, but I want to set up for a strong fourth quarter,” he added. Slimmon searched for companies that “had good revisions post Q2 earnings announcement and yet have underperformed since then,” and named four stocks that he would recommend: Nvidia , Amazon , Taiwan Semiconductor Manufacturing Company and Novo Nordisk. Nvidia shares, which have had a phenomenal rise on the back of the artificial intelligence boom, have been volatile lately, falling from highs this year before partially recovering. Slimmon says it’s a “decent opportunity” now — provided that the stock doesn’t go higher. “So it’s been weak relative to the S & P [500]. So the setup is very good right now,” he said. “But if the stock burns higher and it’s $150 by the time they report [earnings], then I’m going to be really nervous.” Nvidia shares last closed at $118.08 on Wednesday. The company is set to report its fiscal year 2025 second-quarter results on Aug. 28.
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