The S&P 500 is having its best year since 2013.
But one widely used strategy will likely block investors from profiting from the market’s record strength going forward, according to Crossmark Global Investments’ Victoria Fernandez.
The firm’s chief market strategist, who has $5 billion in assets under management, is advising investors to avoid picking S&P groups and go for individual names instead.
“We’re very weary of doing a broad paint-brush stroke for sectors in general because we see that there are many names within each that are going to perform differently,” she said Monday on CNBC’s “Trading Nation.”
Fernandez uses semiconductors Intel and Texas Instruments as examples. They both belong to the same group, but Intel had a far better earnings report for the third quarter. Intel is now up 13% over the past month while Texas Instruments is down 8%. It reported disappointing quarterly numbers late last month linked to the U.S.-China trade war.
She cites retail as another example.
“It’s a very different story for someone like a Walmart versus someone who is more of a mall-based retailer,” said Fernandez. “Some are driven more by online than others. So, that’s why we think looking at individual companies makes more sense because there are idiosyncratic factors.”
Despite her warning about going all in to sectors, Fernandez is positive on the stock market as a whole.
“We’re actually optimistic”
“We’re actually optimistic for the market going forward especially from now till the end of the year going into the beginning of 2020,” said Fernandez.
Her S&P 500 target for this year is 3,100 and 3,300 for year-end 2020. In early trading Tuesday, the index reached an intraday record high of 3,101. The Dow was up slightly Tuesday. The benchmark on Monday hit a fresh record close of 27,691.
“You’ve had the recession and the slowing growth issues. You’ve had a consumer that’s been strong. You have the Fed, and what they’re going to do. The trade issues. All of these things have been uncertainties,” Fernandez said. “I feel like they’re starting to pull back a little bit, maybe starting to trough on some of the global earnings numbers and global growth numbers.”
Disclosure: Crossmark’s Victoria Fernandez has positions in the stocks mentioned during the segment. Comcast is the parent company of NBCUniversal.