Expert Says Bear Market is Nearing End - and Recommends 3 Stocks

Equities are in the “last phase” of the bear market – and investors should look forward to the second half of 2023, one analyst believes.

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According to James Demmert, chief investment officer at Main Street Research, "We're sort of in the latter phase of the bear market."

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"That last phase is usually where the earnings really start to get a crack," he said on Wednesday on CNBC's "Street Signs Asia," using the modest fourth-quarter revenue reported by Home Depot as an illustration. This was the first time the company had fallen short of Wall Street's revenue projections since 2019.

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He cited higher and longer-lasting terminal rate predictions as another indicator that the bear market is about to expire.

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The beginning of the year saw a market rally, but Demmert claimed that it was simply another bear market rally. In reality, the major Wall Street indices closed on Tuesday to end their worst day of 2023 due to expectations that the U.S. As last week's inflation data came in hotter than anticipated, the Federal Reserve announced that interest rates will remain "higher for longer."

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"But, I don't believe the bear market lasts for more than two or three quarters; perhaps the latter stage will be unpleasant. But I think that's it," he added.

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"And I believe that the opportunity will be in the second half of this year. And I believe shrewd investors should compile a list of outstanding businesses and get ready for that," Demmert continued.

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Choose Stocks

Demmert currently favors three stocks.

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Novo Nordisk, a pharmaceutical company, is one of them, according to him, and it's "a good example of what you want to hold in a bad market."

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The corporation, he continued, is a "steady business" and the "leading provider of insulin" globally.

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"At a reasonable multiple in relation to that continuous growth, it's a consistent growth story. Remaining in sectors with resilience during this challenging period of the market, such as staples, health care, and utilities, is really what we advise investors to do. They are monotonous, but that is what gets you through this time, said Demmert.

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He also likes the oil tycoon Shell, which he claims is selling at very fair multiples and pays a 6% dividend in "one of the few truly strong industries."

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He claimed that the energy sector is "thriving" and will gain from China's reopening as well as the "eventual resolution" of the Russia-Ukraine conflict.

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Demmert ended by mentioning Coca-Cola, describing it as a domestic consumer staple with a "recession-proof" corporate strategy. He continued, "It has also shown to be capable of navigating the inflationary environment."