Benzinga - by Neil Dennis, Benzinga Staff Writer.
Rate cut expectations have driven up risk appetite in the last two months, and equity investors have been pushing up stocks at both ends of the market capitalization spectrum. Now could be a good time to focus on the large multinationals, says one market expert.
Tim Seymour, founder and CIO at Seymour Asset Management, is also a research strategist for the Amplify International Enhanced Dividend Income ETF (NYSE:IDVO), an exchange traded fund that seeks companies that follow lower risk and higher yield strategies.
Seymour told Benzinga‘s “PreMarket Prep” Friday that IDVO looks for the large multinational companies that are increasing their payout levels — with high dividend yields, cover call strategies and actively managed. The IDVO, he says, has outperformed the equal-weighted S&P 500 since its conception.
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Seymour On Economic Downturn
“The sequencing of all the post-COVID economic realities have been much slower to play out,” he says.
Everybody thinks lower rates are going to be better and that’s what is driving the market — but, he says, the Federal Reserve is cutting for a reason.
“Higher rates are bad so lower rates seem better. We all know that lower is ultimately not what we want – get your history books out, and when the Fed starts cutting rates it’s not good for equities,” he says.
Indeed, Benzinga reported last week on historical data that show spikes in unemployment shortly after the Fed starts cutting rates. It’s not a causal relationship; it’s because central banks cut rates into an economic downturn.
“They’re cutting for a reason, but I’m not sure we’re going to move a lot lower on rates,” he predicts.
“There are structural elements of inflation here that aren’t going to get a lot better and could get a little worse. So if the Fed wants to hold the line at 2% then I don’t think we’re going to get there.”
So How Does Seymour Play The Market?
“You play the market you have, and I think this market still has a fair amount of cash on the sidelines. I think the market’s going to go higher, but you need to be dancing by the door in a handful of trades.”
Seymour has been an investor in international companies for many years, but has become cautious on China where, he says, sentiment is as low as he’s ever seen it.
“Think about Tencent (OTCPK: TCEHY) and Alibaba (NYSE:BABA) — the pressure is coming from within and not with U.S. investors, and this is part of the problem,” he says.
And rather than the straight artificial intelligence plays — “the technology pixie dust that has been driving our markets” — Seymour said he likes the companies that are likely to benefit most from adopting AI and those that are already benefitting from supplying them with technology.
In the U.S. he likes Nvidia (NYSE:NVDA) and German tech conglomerate Siemens (OTCPK: SIEGY).
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