Investors should look to sectors that lately have been “completely eviscerated” as the U.S. economy seeks to recover from the coronavirus crisis, Morgan Stanley’s Mike Wilson told CNBC on Tuesday.
“We’re bullish overall, and we just think there’s more upside in potentially some of the laggard areas,” Wilson said on “Fast Money.”
“That’s not saying anything bad about Google or the large cap growth stocks. They’re wonderful companies. They’re wonderful business models, but they just don’t have the upside potential that some of these other laggard areas do,” he added.
Wilson, who is Morgan Stanley’s chief U.S. equity strategist, said bank and consumer discretionary stocks could offer investors more potential gains.
“Whenever you have a recession, you should be looking for leadership change. That’s just the way it works,” he said.
Wilson’s comments Tuesday came after a volatile day of trading in which the Dow Jones Industrial Average closed down 32.23 points, putting an end to a four-session winning streak. The S&P 500 dropped 0.5%, and the Nasdaq Composite fell 1.4%
Wilson noted that some of the strongest performing stocks in recent days have been those which were previously hit hard by the coronavirus-driven market declines.
“When you come out of a recession, it should broaden out and that’s what we’re seeing,” he said. “I think it’s a healthy development.”
However, Wilson expressed caution around energy stocks. Although they have had a difficult year, he said, “I wouldn’t recommend diving back into energy given what’s going on there in the commodity markets.”
Wilson, who was one among the most bearish Wall Street strategists in 2019, has said there is opportunity in the market since late March.
On March 26, just days after what has to this point been the market’s coronavirus-driven lows, Wilson told CNBC that “we think this is probably the best risk-reward we’ve seen for investors in two years.”