Stocks closed higher Monday on the first trading day of May as the major indexes bounced back from their worst month in years. Both the Dow and the S&P 500 rebounded after their worst month since March 2020, and the Nasdaq gaining ground after its worst month since 2008. Both the S&P and the Nasdaq hit new lows for the year before closing up for the day. Investors are keeping an eye on several factors, including this week's Federal Reserve meeting, geopolitical factors, and more. Adam Coons, Portfolio Manager at Winthrop Capital Management, joins Closing Bell to discuss today's close, the Fed meeting, tech stocks, whether a recession is on the horizon, and more.

Closing Bell

Stocks Close Higher, Staging Late Comeback as Indexes Come Off of Worst Month in Years

Okay Ken, well, let's turn back to the major indexes again, a solid day of gains, but we're still near our lowest levels of the year of 2022 on the major indexes and it was still a volatile day with the market's down at one point about 1%. And the major indexes at least the NASDAQ ending up 1.6% the S and P of 6/10 of a percent After hitting a new year low today and the Dow of 3/10 of a percent. So joining me now is Adam Coombs portfolio manager at Winthrop Capital Management. Adam, it's good to see you what is your take on the continued volatility that we see and could the old Adage sell in May and go away actually play out this month. Yeah, so like you said at the start of the segment, volatility is absolutely what we're seeing and going to continue to see across markets. And it's largely driven by the fact that earning season um is well underway and is giving us some surprises or hearing a narrative around uh wage wages increase in more than than expected. And that is causing uh firms to, you know, have to relook at their, their business model and the strategy going forward as costs go up. And then on top of that, you have the Fed trying to fight inflation with with these interest rate hikes and so that's got the market just in this, this turmoil of trying to figure out what's going to happen next and anytime we have uncertainty that leads to heightened volatility. Well, certainly, you know, as a portfolio manager at your firm that there is a lot of active trading of course amid the volatility. How are you treating your own portfolio right now? And how much money do you have allocated simply into cash amid the volatility? Yeah. So we we did increase our cash positions coming into the beginning of the year. A large part of that was on the heels of what we expected the Fed to do and the and the moves that they were going to make to tighten policy. So um we're still maintaining that cash position. We have started to incrementally put that money to work last week when we started to do that. Um and and a large part into technology stocks. So with stocks that are down tremendously like google alphabet, um or even netflix, those stories are are building the case for actual value plays once again. So we are starting to the opportunities but we are doing it incrementally and not going all in at once. Okay, so what's your expectation adam? The big question is whether or not we will have a recession here in the US and what that might mean for the market's, could we see for instance, the major indexes declined another double digit percentage point from here. What's your take? Yeah, I mean it's possible and I think that the risk of a, of a recession are rising. Um but what I think we're seeing here is a lot of market participants, market participants are front running that, and that's why you're seeing the NASDAQ down over 20%. So I think what we have to look at is what's going to happen afterwards. Um, and so we think that volatility will maybe drive stocks down. But for the most part, when you look at interest rates, when you look at tech, the market has priced in even some sort of a small recession. So despite the fact that we think a recession could happen, uh, towards the back half of this, this year, um, we think that in a large part is already priced in. Uh and that risk, it means that now is the time to invest. So that's why we're we're dipping our toe into the water because despite recessionary risks, we think that this would be a pretty mild one. Um, and it's not a major credit crisis. So a lot of times the market will actually move ahead of that, interesting. Um Well, here's another question for you. You see pretty much everything declining in the stock market, energy stocks might be the exception adam. Are there opportunities to be had in this market? There's still a lot of uncertainty. I know you just said you're dipping your toe back into investments. I'm knowing that a recession at least a little bit, according to your data is priced in. But are there opportunities, obvious opportunities out there for investors? Yeah, I think what you want to focus on our our two big factors in the market and that's quality and income. So we're looking at. And when you look across the the history um of the market is when you see increased volatility, what you want to be in our stocks that have sure balance sheets for the low debt and have a high cash flow ratio. So, um we're looking at companies like I just said alphabet Microsoft Apple. I know these names are not uh sexy in any way, but they are tried and true names that will withstand any sort of heightened market volatility. They have enough cash on a business model that can withstand any turmoil through the market. So that's what we're seeing opportunity because there's a lot of those stocks that are down Well over 20%. And so that's that's where we're seeing opportunity, where we're staying away is energy. Um we think that the energy markets have mostly topped. Um so we think that the it's asymmetric, asymmetric risk for them to the downside. And also our exposure to banks. We think that a platinum blend. Um So ultimately we're reducing our allegations of banks to interesting, of course, banks saw massive run into the end of last year, but they've nearly fallen out of bed. I think one of the worst performing sectors that we've seen so far this year amid those concerns. Adam potentially about a recession and the yield, the yield curve as well. So this is again a live look for our viewers of the major indexes. We did end with games on the first day of a new month, But if there is that saying, selling Megan go away.