The chief investment officer of wealth and investment management at Wells Fargo says the easy part of the market recovery is over, and that pushing the S&P 500 meaningfully higher from here will require a specific set of conditions to fall into place.
In a new CNBC interview, Darrell Cronk says the recent recovery in equities has been unusually fast, but may limit upside from here.
“We didn’t get to the 10% correction. We got down a little over 8-9%. But recovered in 11 trading days has been well documented from the trough. That’s one of the fastest recoveries ever on record.”
According to Cronk, part of the reason the market rallied so fast is that many traders were either short or on the sidelines and got caught off guard. Cronk says that the over 11% surge has squared positioning, making it difficult for the S&P 500 to move higher.
“Positioning was offside. We needed to square it, right? It got squared. I think it’s tougher from here. It’s hard to get to 7,100, 7,200, 7,300 on the S&P.”
He highlights that two sectors must gather bullish momentum and take center stage for the S&P 500 to witness another leg up.
“Financials and tech are 46% of the market cap weight. So they’ve got to play. We just upgraded tech on April 6th, about two weeks ago now. It’s already up 11%, and we funded it with energy, took energy to an underperform when oil was $110. It’s already down 5-6% on the gig sector and energy. So that’s a 15% pairs trade in two weeks. There’s been, under the surface, a lot of movement.”
As of Thursday’s close, the S&P 500 is trading at an all-time high of 7,041.
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