(Bloomberg) -- The sharp selloff in U.S. stocks has taken the froth out of the market and made many stocks more attractive, Well Fargo & Co. strategists said, becoming one of the first brokers to recommend buying the latest dip.
“It is time to put new money to work,” strategists led by Christopher P. Harvey wrote in a note to clients on Tuesday. “Heading into 2022 we called for a 10% pullback in equities and for the ‘bend-not-break’ mentality to crack. With Monday’s intraday slide we checked both boxes.”
READ: Strategists Predict Trouble for U.S. Stocks After Massive U-Turn
Wells Fargo are among the first strategists to recommend buying the dip after the recent turmoil as many market participants warn that a slowdown in economic growth and monetary tightening are a toxic mix for risk assets.
Equities had a rollercoaster session on Monday as investors fretted over Federal Reserve’s upcoming meeting and possibly aggressive rate hikes. The technology-heavy Nasdaq 100 Index erased losses of as much as 4.9% to close higher as dip buyers came back, but futures signaled possible further declines for expensive growth stocks on Tuesday.
Wells Fargo strategists, who see about 7% upside for the S&P 500 by the end of 2022, said growth stocks can stage a sharp rebound during any market reversal but longer-term expect them to suffer from outflows on higher real rates and negative earnings revisions.
Among individual shares, Wells Fargo strategists said stocks that are the most sensitive to Covid-19 news were ripe for a recovery on the optimism that omicron cases have peaked. Media company ViacomCBS Inc., retailers Bath & Body Works Inc. and Gap Inc., MGM Resorts International, Diamondback Energy Inc. and Boeing Co. were among the overweight-rated stocks by the brokerage.
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