Asset manager Dan Ferro believes US stocks could go through a steady decline before embarking on a “strong rally” by the end of the year. The broad rally in US stocks in July raised hopes for a sustainable recovery in stock markets. Speaking on CNBC’s “Squawk Box Europe” before the start of the US trading session on Monday, Veru attributed the good July performance to better-than-expected earnings and “acceptable” third-quarter guidance. Ferro, chief investment officer at Palisade Capital Management, said he expects the recent bear market rally to continue as more companies report. All three major US averages closed higher on Wednesday, ending a two-day losing streak. The Dow Jones Industrial Average rose more than 400 points, while the heavy Nasdaq Composite jumped about 2.5%, and the broad-based S&P 500 Index hit its highest level since June. ‘Strong’ year-end rally Veru believes the stock market remains macro-driven and could see more volatility before the end of the year. “As fall approaches, I think stocks could be subject to a new round of selling. The decline is usually a period of weakness in stocks, but I am concerned that the full force of higher interest rates and quantitative tightening from the Federal Reserve could create a new round of selling,” Ferro said. He noted that the full impact of inflationary pressures and a series of interest rate increases this year will be felt this quarter, which will translate into “greater uncertainty” for third-quarter earnings. “Also, the upcoming US midterm elections, and higher energy prices could lead to , and supply chain issues to create enough uncertainty to make stocks weaken. I’m not sure if US stocks will make another low, but a lot of the recent gains could be lost. before 2 november [congressional] elections.” However, Veru expects a “strong year-end rally” for stocks after the lower sell-off. Commodity prices should start falling. By the end of the year, a new bull market should start taking us well into 2023 and beyond. The energy sector is the best performing segment in the S&P 500 by a mile long this year, having gained more than 40% since the beginning of the year, according to FactSet data.Read more Wall Street pros say these small companies are good buys as recession approaches – Bank of America Gives A 40% Rise These Stocks Are Poised To Return If Inflation Peaks, Jeffreys Says Market Bottomed? Here’s What Wall Street Has To Say After US Stocks Rebound In July, But The Sector Is Back Only 5.6% During The Month The past – a poor performance of consumer appreciation, technology and industry – amid slumping crude oil prices and growing recession fears. With “the US dollar likely to have peaked” in the near term, Ferro says this bodes well for industrial stocks and commodities. In particular, he believes The outlook for the sector looks like Industrial “Very good” while the reviews also seem more attractive. It is also admired by the healthcare industry for its ‘defensive properties’. The sector is down 6.3% this year, outpacing the S&P 500, which has lost nearly 14% of its market value this year. Palisade Capital Management manages more than $5 billion in assets through the end of 2021.
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