Stocks closed near session highs on the first trading day of the third quarter, kicking off the second half of the year. Investors are keeping an eye on inflation, warning signs from several companies about lower profit guidance, and more. Despite these gains, all of the major averages posted their fourth down week in five, and the S&P 500 posted its worst first-half performance in decades. Aadil Zaman, Partner at Wall Street Alliance Group, joins Closing Bell to discuss today's close and whether and when the U.S. could enter a recession.

Closing Bell

Stocks Close Near Session Highs on First Trading Day of Q3

let's turn back to the major indexes, ken, it smells like fireworks down here on the floor of the new york stock exchange. And this is a year to date chart for the major indexes. But we actually did close higher near session highs as we start the second half of this year. It is july 1st today. So joining me now to discuss is Adele Ziman partner at Wall Street Alliance group. Adele Good to see you. Thanks so much for coming on and your reaction as we start the second half of the year. What should investors be prepared for? Happy 4th of July Kristen Good to be with you. So we feel that historically, you know, this, these bear markets on average lost for about 16 months And average bear market decline is about 35%. And although we may be closer to the bottom right now, we feel that the bear market has longer to go because of the magnitude of the issues that we are facing right now and investors that we're hoping for a V-shaped recovery similar to what we had in 2020, I'm afraid they're going to be disappointed. In fact, we have been calling for in the beginning of the year. We called for a correction in the first half of the market And 2022, actually the first half has turned out to be the worst first half since 1970. So investors should tread carefully in this environment. So certainly those who have been more bearish like yourself. Adele, given the current macroeconomic environment, certainly having their moment the first six months of this year is it was quite dramatic. You're right actually the worst start to a year ever for the NASDAQ as far as that data goes back and since 1962 on the Dow. So really not pretty no matter which way you slice it there. I was speaking of a potential recession, the Atlanta Fed GDP Tracker showing that the U. S. Economy is likely in a recession. There's debate on that on Wall Street, are we? Are we not? If we get one, is it brief, is it prolonged? Is it shallow? Is it deep? What's your take? So we were in that camp where we are not terribly concerned about the recession, we we will be in the camp. We will say that it's going to be relatively shallow and short term if it happens. The simple reason for that is that the U. S. Consumer balance sheets are still very strong. The U. S. Consumer savings americans are sitting on about $2 trillion equity, That's at a record 27 trillion. And if you look at unemployment, that's at a historic low of 3.6% Contrast that Kristen with the unemployment in the last recession which was north of 14%. And even if you look at the housing market, it's cooling off a bit. But it's not falling off the cliff for the simple reason that we have a housing shortage in the past decade, there was an under construction in housing that didn't keep up with the population growth. So we're in the camp where we feel that eventually the economy will start growing again and eventually the stock market will start going back up again as well. Although it will take some time. Are there any sectors, any stocks that you like Adele? We've had some guests on the show say that saying that as the market is pulled back so dramatically they are starting to buy names here and there, but they are selective and it's on a company by company basis where they decide to invest. Great question. So, so we feel that this market is probably in for additional volatility going into the 2nd and 3rd quarter earnings season as companies companies make earning revisions and because of that, we feel that this period of revaluation that we are going going through, investors will have an opportunity to take advantage of certain trends. So for example, we feel that, you know, for the past decade, growth has been outperforming value, but we feel that the tables are going to turn and value is going to outperform growth and investors will be rewarded in sectors like consumer staples and utilities because those will be perceived as a safe haven. We also feel that investors in stocks that are have low have high P. E multiples or have low earnings, Those are going to continue to get punished. But there will be opportunities in good quality businesses that have solid cash flow on market declines in the energy space. Adele, some people have said that energy could continue to climb from here. Others are starting to get a little bit more pest pessimistic. We think that energy is a really important part of the of the portfolio at this point in time, I think that initially there was this thought process that we are going to move away from fossil fuels that is going to be a very long term process. And I think energy prices, oil prices will continue to be higher because of the situation in Russia and a lot of these large bigger oil companies, they will be in a good position to be able to profit from that and to be able to do more buybacks and to be able to do more dividends. So, energy sector, in our opinion is a really important sector in portfolios at this point in time. Adele thanks so much for joining, especially before the long holiday weekend. Again, the markets closed on monday, that's Adele Zaman partner at Wall Street Alliance Group