Rallies within the current bear market are a good time to reallocate holdings — and staying in cash isn’t a bad idea, says one strategist.
“We’re recommending to take advantage of these times when the market is having a bull rally, during this bear market — to reallocate portfolios —to clean up some of the holdings that you don’t want any more and repositions to things that we like,” Kathy Entwistle, managing director at Morgan Stanley, told Yahoo Finance Live.
“Surprisingly, right now cash is king. It's very powerful. You’re getting paid for your cash," she added.
Certificate of Deposit rates have been increasingly higher amid the Federal Reserve's current monetary tightening policy.
“We also like bonds, municipal bonds, high grade corporate, and also treasuries,” said Entwistle.
The strategist highlighted, “The equity portion is a little tough right now, we’re being very cautious and careful and just legging in when we have more downdrafts in the market versus ups in the market.”
If you are going to stay in equites, defensive stocks are a way to play the market, says Quincy Krosby, LPL Financial chief equity strategist.
“We still like health care,” said Krosby. “Once capital markets come back to life, you’re going to see quite a number of deals in the healthcare space, biotech and larger pharma.”
She is also bullish on energy.
“I know oil prices have come down, [but] we actually like the energy complex,” she added.
The strategist noted crude has pulled back China's COVID concerns, with the markets also impacted by low liquidity.
“We think that is going to change,” she added. “We have a shortage. We need to get to the green side if that’s where we’re headed.”
"America needs to run on something — Diesel and fuel — till we get to the other side," she noted.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre