Prudential Financial’s Quincy Krosby has advice for investors: Let the stock market volatility work for you.
She’s confident the market’s wild swings will ultimately subside and generate strong upside.
“If the sell-off continues and it deepens, it’s going to provide tremendous opportunities as the market settles down,” the firm’s chief market strategist said Monday on CNBC’s “Trading Nation.”
Stocks fell sharply Tuesday morning and the major indexes turned negative for the year.
Krosby isn’t ruling out a retest of October’s lows because of the uncertainty surrounding the market when it comes to Federal Reserve policy, the U.S.-China trade war and global growth jitters.
“If you have to go into the market now, we suggest you go into the defensive names,” she said, highlighting health care, consumer staples and utilities.
Her thoughts came as the major indexes kicked off another the week in sell-off mode. The tech-heavy Nasdaq slipped deeper into correction territory. It was off 10 percent over the past three months as of Monday’s closing. However, Krosby sees the wreckage in tech as an option for investors who have a strong risk tolerance.
“You may want to take a look at the ones that have been really beaten down,” said Krosby. “Cloud is not going away. Cybersecurity is not going away. But nonetheless, they’re going to have to probably sell off more as we see the tech names just basically being a source of funding perhaps for hedge funds right now. But this, too, shall pass.”
For investors with a weak stomach for volatility, she notes that sitting on the sidelines isn’t such a bad strategy either.
“If you can sit out and wait in cash, I think the opportunities are going to come to you,” she added.
And, she suggests that could happen before the end of the year.
Not too late for Santa Claus rally?
According to Krosby, it’s not too late for the markets to stage a Santa Claus rally. If the markets can muster the momentum, it’s possible stocks could end the year higher than current levels — especially if the Federal Reserve indicates it will hike fewer than four times between now and 2020 and the U.S.-China trade tensions ease.
“Any headline that comes in and changes our perception of those two major, major issues for the market could actually underpin a stronger turnaround before the end of this month,” Krosby said.