Investors should remain cautious as the year-to-date gain in equities could erode just as easily as it was conjured, says Kevin Simpson – Chief Investment Officer of Capital Wealth Planning LLC.
Simpson’s outlook on the equities market
Versus its year-to-date low, the S&P 500 index is now up 6.0% – a strength that Simpson finds “shocking” considering a string of what weighed on the equities market last year is still at play.
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I think the markets are completely ahead of their skis. From a valuation perspective, what can make stocks go higher? Well, earnings could go up a lot. But I’m not convinced that’s going to be the case.
Multiples, he added, are unlikely to expand either since rates are expected to stay higher for longer.
A day earlier, Citi’s Kristen Bitterly also said investors should take the recent rally in the benchmark index with a grain of salt (read more).
Simpson is sticking to dividend aristocrats
According to Simpson, a continued move up in the S&P 500 is unlikely even if the earnings and guidance come in not as bad as expected because much of that optimism is already priced in.
He dubbed it a victory if the index manages to close this year around where it’s at currently, but warned on CNBC’s “Worldwide Exchange” that the probability of that was rather bleak.
We’ve come too far, too fast. So, I’d continue to be a bit more defense and take this rally with a fair amount of scepticism. I think maybe we should begin tempering our expectations a little.
In terms of investment, Simpson continues to see dividend stocks as great picks for 2023.