Anika Begay
Markets have been very choppy lately, but Morgan Stanley Investment Management’s Andrew Slimmon has a view of where they might go from here. He says the market could be “consistent with 2023,” after a lot of volatility in recent weeks. In late July, both the S&P 500 and Nasdaq fell to their lowest levels since 2022 before recovering. Global markets, including the U.S., sold off heavily last week before recovering this week. After August’s sell-off, markets could have a “recovery rally” in mid-September before falling “another notch” and bottoming out in October, Slimmon said. He said markets are currently in the recovery rally phase as the latest inflation data is “benign” enough to suggest the U.S. Federal Reserve will cut rates in September. Slimmon, a senior equity portfolio manager at the firm, said markets rewarded companies with the best earnings revisions in the first half of the year. Those winners took a beating during the July and August sell-off, but now there’s a “big opportunity” to revisit them. “And maybe it’s some of the AI stocks that were red hot in June… So I think you were in a period of time here where the market is in a dicey spot,” he told Vscek’s “Squawk Box Asia.” “But I think going into the fourth quarter, you want to own the stocks that were winners in the first half of the year, I think they’re going to come roaring back. And I think that’s going to be good for active management.” Slimmon manages the Morgan Stanley US Core Fund and the Morgan Stanley Global Core Fund. The former has gained 18.03% since the beginning of the year, beating the S&P 500’s 14.89%. The latter has risen 14.68% over the same period, beating the MSCI World Index’s 11.54%. Despite the wobbles, Slimmon believes the S&P 500 could fall further in a month, but ultimately “get close” to 6,000 by the end of the year. The index closed at 5,543.22 on Thursday. “I’m trying to pick companies that have had the best fundamentals, that have sold off recently and reduced… So there’s an opportunity for what I would call a fundamentally upgrade of portfolios in companies that are showing the best earnings revisions, the best fundamentals,” he said. “This could be a tough period, but I want to prepare for a strong fourth quarter,” he added. Slimmon looked for companies that “had good reviews after their second-quarter earnings announcement and yet have underperformed since,” and named four stocks he would recommend: Nvidia, Amazon, Taiwan Semiconductor Manufacturing Company, and Novo Nordisk. Nvidia shares, which have had a phenomenal rise on the back of the artificial intelligence boom, have been volatile lately, falling from their highs this year before partially recovering. Slimmon says it’s now a “decent opportunity,” as long as the stock doesn’t go up. “So it’s been weak versus the S&P [500]. So the situation is very good right now,” he said. “But if the stock burns higher and it’s $150 by the time they report [earnings]then I’m going to be really nervous.” Nvidia shares last closed at $118.08 on Wednesday. The company is scheduled to report second-quarter fiscal 2025 results on Aug. 28.
