If last year felt like “investing nirvana,” PNC Financial says this investing climate is feeling more like “Led Zeppelin.”
The firm’s co-chief investment strategist, Amanda Agati, believes the path to gains will be no stairway to heaven.
“It feels like the market is a little bit heavier this year,” she said Monday on CNBC’s “Trading Nation.”
It appears that heaviness was bearing down on Wall Street as trading kicked off the week.
The Dow saw its worst day since March 1 and closed below its 100-day moving average. The S&P 500 and tech-heavy Nasdaq also ran into trouble — seeing their worst days in nearly six weeks.
Agati blames several headwinds that were virtually nonexistent last year for the issues facing Wall Street. They include 10-Year Treasury rates and volatility ticking up — as well as policy issues surrounding leadership and tariffs in Washington.
“Typically, the markets shrug off kind of the first year of a new administration. It’s sort of a courting period or a getting-to-know-you kind of phase between D.C. and the markets,” said Agati. “That time is about up now. We’re starting to see that, I think, impact market sentiment.”
But that doesn’t mean 2018 will be a train wreck.
“It’s not that we don’t think the markets can’t eke out decent gains for the year. But we think it’s a tougher slog ahead,” she added.
Agati doesn’t see signs of a bear market or another correction. She believes the next chance of a recession likely won’t happen until early 2020.
But what has changed is the market cycle, according to Agati. She’s advocating active over passive investing.
“When you have a rapidly rising market and cycle, which is what we’ve been in the last few years, it pays to have just broad-based market exposure,” she said. “With this sort of coming in towards the end of a cycle or at least being in the later innings, we do think there will be a resurgence of opportunities for active managers.”
Her favorite groups include regional banks and defense right now.
“We really like the regional banks here. Although they have had a nice run, we think there’s still a lot of opportunity left. They’re certainly a key beneficiary of rising rates, and the mortgage market has been pretty strong,” Agati said.
As for defense, she believes the recent pullback is a solid entry point for investors and could result in a pitch perfect investment.