Why One Expert Says A 10% To 15% Market Correction Could Be A Significant Buying Opportunity

One expert sees a possible correction on the horizon, but says investors would be wise to take advantage of any weakness. Here’s why.

Stocks moved higher on Thursday after President Joe Biden said that the White House has struck an infrastructure deal with a  bipartisan group of senators.

The S&P 500 closed at a record high of 4,266.50, and the Nasdaq hit a new all-time high as well closing at 14,369.71. The Dow gained 1% to 34,196.89, just 2.6% below its all-time high.

“With the market hitting new highs this week, investors could be coming to terms with the fact that the Fed will inevitably raise rates,” said Mike Loewengart, managing director of investment strategy at E-Trade.

But with the major indexes at or near record highs, Invesco’s Kristina Hooper warns the market is vulnerable to a 10% to 15% correction this summer. 

“We’re in something of a precarious period… because we’ve gone so long without any kind of significant sell-off for the stock market. In addition, we’re watching the Fed try to maneuver into a very different position,” Hooper, the firm’s chief global market strategist said. “There’s always a risk when you have a market that has been driven largely by the Fed.”

Still, Hooper argues that any pullback would be a good buying opportunity for eager investors as she expects a quick recovery from any sharp sell-off.

“I would be a buyer on that pullback as soon as we saw a drop of 8% to 10%,” Hooper said. “This could be a significant opportunity – one that investors have been waiting for.”

As for what to buy when the time comes, Hooper suggests stocks that are tied to the economic recovery in the short term, which she says will outperform in the current environment. 

“Keep in mind that this is a strong economic recovery,” she added. “That would favor cyclicals and smaller caps.”

But over the longer term, Hooper is bullish on tech.

“Over the longer term, I am very excited about the tech sector,” Hooper said. “There are a lot of strong catalysts there, and I think it really is going to be an outperformer when we look out one to three years.”