Cirrus Research shares their thoughts on the best and riskiest bids to make during the market rally

FactSet’s most recent podcast episode features Satya Pradhuman, who outlines Cirrus’s perspective on the rally, and specifically how investors can position their portfolios to best navigate through what the firm defines as a bear market rally.

“Earnings are likely to remain lackluster for quite some time," said Pradhuman, "We’ve gone through a bear market rally pricing in some of our worst fears, we’ve seen the market snap back, potentially forecasting that the credit market is about to settle. And, at this point now we think certain stocks have moved so sharply it makes sense for investors to start taking profits.”

Pradhuman also discusses situation in the European Union, where the banking system has written off only a fraction of the debt that its U.S. counterparts have. As the banking system abroad struggles, Pradhuman predicts a weaker Euro trend.  

“We think that the Euro might be a very interesting component to the equity puzzle. If you look at some of the forecasts generated by the IMF [International Monetary Fund], they’re basically telling us that European banks are much more behind on addressing the bad loans….What are the U.S. firms, sectors, industries that have severe exposure to European markets? If the Euro weakens that’s potentially where you’ll see the largest hiccup to earnings….If we’re more right than about a weaker Euro trend then it ends up pointing us to about four to five industries that we should focus on and that allows us to minimize some of that risk.”