The market’s greatest bull forecasts the S&P 500 will rally another 7%, however he alerts a popular trade will not be along for the flight.
Wells Fargo Securities’ Chris Harvey just recently cut software application to underweight from neutral and stated it a congested trade. He based the choice on technicals and incomes basics and high assessments.
“From a valuation point of view, you’re paying about a 75% premium to the market for software and that’s too rich,” the company’s head of equity technique informed CNBC’s “Trading Nation” on Friday.
The Dow Jones United States Software Index is up 28% over the last 5 months.
“It is a work from home play,” statedHarvey “We just don’t think there’s a whole lot of opportunity in the short term.”
He discovers the opposite holds true for media and home entertainment.
“When we downgraded software, we did upgrade media and entertainment,” statedHarvey “If we look at the media and entertainment space, you’re seeing better upward revisions, better growth opportunities. But you’re only paying a 15% premium.”
He increased his media and home entertainment group score to obese from neutral and noted it as his leading market play.
“There’s a lot of money to be spent. There’s still a lot of pent-up demand,” he stated. “The media and home entertainment area uses a better chance to take advantage of that resuming play.
Not just does he see strong basics and enhancing belief, Harvey competes marketing is rebounding in the varied group, that includes whatever from cable television business and huge cap tech names.
The S&P 500 Media & &(************************************************************************* )(***************************************************************** )is up 4% over the last month and 34% up until now this year.
‘We wish to get more aggressive’
“Opportunities still are plentiful, and we wish to get more aggresssive on that cyclical trade,” included Harvey.
Last Tuesday, Harvey increased his S&P 500 year-end rate target to 4,825 from 3,850, a Wall Street high. Despite his bullishness for the last 4 months of the year, he offered a less positive outlook for 2022– providing a 4,715 target. Harvey thinks a the record year will be followed by a hangover of sorts.
But in the meantime, he’s securely in the risk-on camp.
“We desire more cyclical direct exposure,” Harvey said. “We desire more direct exposure to what we think about high Covid- beta plays due to the fact that we do believe the economy is going to move on.”
On Friday, the S&P 500 and tech-heavy Nasdaq closed at all-time highs. The S&P 500 closed over 4,500 for the very first time. Meanwhile, the Dow has to do with a half portion point far from its record high.
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