Market Strategist Explains Why Buy-The-Dips May Not Work In Current Times: 'Need To See The Fed Pause Interest Rate Hikes'

Ameriprise Financial Chief Market Strategist Anthony Saglimbene reportedly said the current economic situation where earnings estimates are coming down and interest rates are going higher does not provide a conducive environment for buy-the-dips.

What Happened: "As long as economic data is coming in hot, I think it puts pressure on the Federal Reserve to keep lifting interest rates,” Saglimbene told Bloomberg TV.

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“It’s really that catalyst for the market to see a sustained momentum higher in stock prices. We need to see the Fed pause interest rate hikes, we need to see some stability in earnings estimates. And we are just not in that environment right now. So, I don't think this is a buy the dip type of environment," Saglimbene added.

Bonds: The market strategist believes stocks are also witnessing stiff competition from bonds as yields have been on the rise and are providing a decent return.

Equity markets have already witnessed significant bouts of volatility in the first two months of 2023. After January's rally, most of the gains were pared in February, dragged by strong economic data and a tight labor market. However, after last week's downbeat performance, markets did witness a breather on Monday. The SPDR S&P 500 ETF Trust (NYSE:SPY) closed 0.34% higher while the Invesco QQQ Trust Series 1 (NASDAQ:QQQ) gained 0.72%.

"We also have a lot of competition from bonds. Now you can earn competitive returns in yields on much more conservative investments. So, I think the combination of competition with stocks in an environment where rates are moving higher earnings estimates are coming down, it’s not really conducive for buy the dip," Saglimbene said.

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