Why This Veteran Portfolio Manager Is Less Inclined To Buy Oversold U.S. Stocks

The U.S. equity market has seen a degree of deterioration that is, in many ways, as bad as what was seen leading up to the global financial crisis, according to veteran portfolio manager David Lundgren.

“...normally in a correction, even in a cyclical bear market, you don't see long-term monthly charts break,” said Lundgren, a CMT, and founder and chief strategist at MOTR Capital Management and Research.

Since the financial crisis, most corrections have left the long-term monthly charts unscathed, he said, in an interview with BQ Prime on the sidelines of the CMT Association's event in Mumbai.

However, this correction has done quite a bit of damage to those charts, Lundgren said, adding that he is a lot less inclined to buy oversold conditions in the current scenario.

There is enough evidence to suggest a tactical low in the U.S. equity market, he said. For the S&P 500, a level of 3,900–4,000 points can be seen as that low. But even if the index falls below that point, Lundgren is unwilling to take on the maximum exposure he could typically take on with the funds that he manages.

Dollar In Long-Term Monthly Uptrend

The greenback has been gaining against most major currencies since the Federal Reserve embarked on its rate-hiking journey. So far this financial year, the dollar has appreciated by 13% despite easing off its peak in recent weeks.

“The dollar is in a major fundamentally driven, long-term monthly uptrend relative to almost every other cross. The only other crosses would be the Mexican peso, the Brazilian real, and the Russian ruble,” said Lundgren.

The portfolio manager said he would be willing to buy the dollar whenever there are bouts of weakness.

The dollar is in a fundamental-driven uptrend