Canaccord Genuity Chief Market Strategist Tony Dwyer joins Alpha Trader hosts Aaron Task and Stephen Alpher to kick off the podcast's 2020 season.
Dwyer was among the more bullish strategists last year - and he remains constructive on stocks - but the market's big rise leaves the S&P 500 (SPY) only about 5% below his 2020 target. At the root of Dwyer's bullishness last year was the Fed's about-face, with a switch to rate cuts throughout 2019 vs. the previous years' rate hike cycle.
Currently, a number of technical and sentiment factors are pointing to over-exuberance, says Dwyer, and he's expecting a modest pullback in stocks (timing to be decided upon). The bull market remains intact though, and Dwyer would be a buyer on the dip, particularly in economically sensitive sectors like financials (XLF), industrials (XLI), and information technology (XLK).
Dwyer believes there's been a generational shift in thinking at the Fed, with the central bankers now way more worried about the U.S. becoming the next Japan or Europe, rather than inflation getting to perky. It could be a "very, very long time" before the Fed embarks on another series of rate hikes.
Dwyer also weighs in on the Fed's massive injections of liquidity into the repo market. Smart folks can argue about whether this is simply necessary plumbing or a stealth QE, and Dwyer is happy to defer to their opinions. Bottom line, says Dwyer: "Who cares?" Call it whatever you wish, but the Fed is telling you it's going to inject tens of billions into the system each month. Invest accordingly.