If you’re a long-term investor, Federated Hermes’ Phil Orlando sees potential for record gains.
But if you’re looking for upside this year, you may want to hunker down some more.
“The economic and corporate earnings news for the next month or two is going to be dreadful,” the firm’s chief equity market strategist told CNBC’s “Trading Nation” on Monday. “You could see some 10% consolidation.”
According to Orlando, it’ll take 18 to 24 months for the S&P 500 to reclaim all-time highs and trade above 3,400. The index hit its 3,393 record level on February 19. On Monday, it closed at 2,832.
“2020 to a significant degree is going to be destroyed in terms of economic growth and corporate earnings growth,” he said.
Orlando, who come into this year as one of Wall Street’s biggest bulls, warned investors in February that the virus’ impact could pound the markets for months.
Despite his bearishness, he didn’t stop buying stocks. With at least a two year time horizon, Orlando saw opportunities.
“Patience is a virtue,” he added.
His base case is the economy will start re-opening slowly in the next month or two — with a sharp recovery beginning in the year’s second half.
Orlando thinks technology and health care stocks will continue to outperform the overall market.
His longer-term plays are two underperformers: Financial services and small caps.
“If the economy starts to grow again in the second half, banks are going to be part of that equation,” Orlando said. “Smaller cap stocks have gotten disproportionately hit relative to large cap stocks. The dollar remains strong, and we think the U.S. economy is performing a lot better than everybody else around the world.”