As Wall Street braces for a half-point interest rate hike on Wednesday, Canaccord Genuity’s Tony Dwyer sees the ingredients for a strong market rebound.
However, this is not related to a fundamental change in economic and market risks. So, investors may want to resist everything.
“We’re going to get an oversold bounce. Sentiment and my tactical indicators are about as bad as they get,” the company’s chief market strategist told CNBC’s “Fast Money” on Tuesday.
According to Dwyer, the rally should materialize this summer. He expects the S&P 500 to jump at least 5%. Currently, the index is 13% below its all-time high on Jan. 4.
“What did the worst could bounce back”
In anticipation of a summer boost, Dwyer thinks investors could start snacking on the year’s laggards. He speculates technology, financials and consumer discretionary are well positioned to capture the biggest upside.
“What’s done worst might bounce back,” he noted.
But Dwyer warns the gains will be temporary.
Although he is not in the recession camp right now, he predicts that aggressive tightening by the Federal Reserve, coupled with a slowing economy this fall, will contribute to further market swings.
On “Fast Money” in late March, Dwyer warned investors that “the Fed is in a box.” He still calls it a problem, especially as the availability of money dwindles and inflation persists.
“How we approach the end of the year will depend on what the Fed does,” Dwyer said.