The recent tech rally may be doomed to fail.
Richard Bernstein Advisors’ money manager Dan Suzuki warns that the market is far from bottoming out — and it’s a concept investors don’t understand, especially when it comes to names for growth, technology and innovation.
“The two certainties in today’s world of uncertainty are that earnings growth will continue to slow and liquidity will continue to tighten,” the company’s deputy chief investment officer told CNBC’s “Fast Money” on Tuesday. “That’s not a good environment to jump into these speculative bubble stocks.”
Fresh off the holiday weekend, the tech-heavy Nasdaq bounced back from a 216-point deficit to close nearly 2% higher. The S&P 500 also reversed, erasing a 2% loss earlier in the day. The Dow closed 129 points lower after knocking out 700 points in the early hours of the session.
Suzuki suggests investors are playing with fire.
It’s kind of a ‘don’t touch’ story,” he said. “The time to be optimistic about these stocks as a whole is when we start to see signs of a low in earnings or if you see signs that liquidity will increase . pumped back into the system.”
However, the Federal Reserve has withdrawn the punch bowl. And it has serious consequences for almost all US stocks, according to Suzuki.
“Which company you choose, be it the cheapest companies, the companies that generate the best cash flows or the highest quality companies, what they all have in common is that they benefit immensely from the last five years of record liquidity,” he says. “It basically created a bubble.”
Suzuki and his company’s bubble dates back to June 2021. Last May, Suzuki told “Fast Money” that a bubble hit 50% of the market. He still tells investors to play defensive and focus on counter-productive actions.
“Look for things that go against the trend, things that have a lot of positive, absolute benefits from here,” said Suzuki, who is also a former Bank of America-Merrill Lynch market strategist.
The best option might be to go halfway around the world. He only sees China as attractive and investors need a time horizon of 12 to 18 months.
China: Bull Market ‘Abyss’?
“chinese market” [is] much, much cheaper based on valuation. From a liquidity perspective, they’re the only major economy trying to pump liquidity into its economy,” Suzuki noted. “That’s the opposite of what you see outside of China and the rest of the world.”
He believes it could be on the “precipice” of a bull market as long as earnings growth permeates the broader economy.
Even if he’s right, Suzuki is urging investors to exercise caution.
“If we are in a global slowdown that could eventually lead to a global recession, now is not the time to step on the metal somewhere in the portfolio,” said Suzuki.