Investment strategist: don't panic over stock market!

Posted at 2:23 AM, Dec 21, 2018
and last updated 2018-12-21 02:23:10-05

CNN — Everything is bleak on Wall Street.

"You have a market that is looking for any kind of negative impulse," Keith Bliss, a trader on the floor of the New York Stock Exchange, told CNN's Paula Newton on Thursday's "Markets Now" live show. "There's a bit of a buyers' strike here. Nobody wants to come in to buy."

The Nasdaq is flirting with a bear market. Oil is down 5% and already deep into bear territory. The Russell 2000 and Dow transport indexes are in a bear, as is the Shanghai composite index. The Dow and S&P 500 are getting close.

As practically every other investor runs for the hills, that leaves opportunities for smart investors. The S&P 500 is trading at just 14.5 times next year's expected earnings, well below its historical average of 16 times earnings. That means stocks are undervalued.

"Yes, things are slowing down ... but we aren't falling off a cliff," said Lindsey Bell, CFRA Research Investment Strategist, on "Markets Now" Thursday. "A slowdown is fine."

Bell suggested investors pour money back into tech, which has taken an absolute beating in recent months. Investors are deeply concerned about increased regulation, particularly as Facebook privacy scandals seem to pop up every week. Demand for Apple's iPhone continues to wane and many tech companies face higher component prices if the trade war between the United States and China escalates.

Yet tech companies' balance sheets are strong, and they continue to lead the economy. Not much has fundamentally changed for tech companies since the Nasdaq hit its all-time high in August.

Bell also recommended utilities stocks as a defensive investment. And she said avoid financial industry stocks, because they are most susceptible to struggles in an economic slowdown.

She expects earnings to grow 7% in aggregate next year. That's still healthy, though far less than the 23% growth from 2018, jolted by the corporate tax cuts at the beginning of the year.

"As we look forward to 2019, we are cautiously optimistic," Bell said."