Market Overview

Pro: Markets May Not Reach New Highs Until 2022


The S&P 500 index will trade to new highs, but investors might have to wait until 2022 for that to happen, Federated Hermes' Phil Orlando said on CNBC's "Trading Nation."

What Happened

The near-term picture for stocks will look "dreadful" as economic and corporate earnings will surely disappoint amid the coronavirus outbreak, Orlando said. The trend could continue through the rest of 2020 as economic growth and corporate earnings growth will be "destroyed" by a "significant degree."

As such, the prospect of the S&P 500 returning to its record highs of 3,393 in 2020 is unlikely. Rather, it will take at least 18 months and as long as 24 months for new gains to be seen.

Why It's Important

Even if stocks take time to recover, there are still some buying opportunities as "patience is a virtue," Orlando said. Stocks are supported by the strong U.S. dollar and the American economy is "performing a lot better than everybody else" right now.

Investors may want to consider two sectors that have underperformed but have catalysts to regain momentum: Financial services and small-cap stocks.

If the U.S. economy starts to show momentum in the back half of 2020, banks are "going to be part of the equation," he said. Also, smaller-cap stocks have been disproportionately impacted relative to large-cap stocks which creates a potential opportunity.

Two sectors that are outperforming the market and could continue doing so include technology and health care.

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Posted-In: CNBC Coronavirus Federated Hermes Phil Orlando Trading NationFutures Markets Media