- Investors are "almost obligated" to buy stocks after the recent rout, Credit Suisse's top US equity strategist told CNBC.
- Jonathan Golub cited rising corporate earnings estimates and stock sell-offs bringing in more attractive valuations.
- He expects the US to fall into a recession in late 2023 or early 2024.
Solid corporate earnings estimates and attractively valued stocks have created a buying opportunity for investors as the US economy is likely to sidestep a recession until next year or 2024, Credit Suisse's top US equity strategist told CNBC on Wednesday.
US stocks have sunk into a bear market this year, with the Nasdaq Composite losing about 29% and the S&P 500 giving up more than 20%. Stocks have largely been pummeled as the Federal Reserve increases borrowing costs in an effort to cool the hottest inflationary environment in 40 years. Inflation in May hit 8.6%.
"I think the really big story this year is that the earnings outlook, which nobody's talking about, is up between seven and a half and 8%. And what you've had is this massive correction in stock multiples from something like 21 and a half to 15 and a half, making stocks much more reasonably valued," Jonathan Golub, chief US equity strategist at Credit Suisse, said in Wednesday's interview.
"The more speculative [group of stocks] is down the most and that's really good news because it means that the likelihood of a 1999-style blow up is probably much less because the stuff that's frothy has gotten hurt the most," he said.
Golub appeared on the same day Bill Dudley, former president of the Federal Reserve Bank of New York, said in a Bloomberg opinion piece that a US recession is "inevitable" within the next 12 to 18 months. He said it's unlikely the Federal Reserve, led by Chairman Jerome Powell, will keep the world's largest economy from experiencing a so-called hard landing as policy makers try to tame high inflation with significant interest rate increases.
Golub anticipates the US undergoing a recession in late 2023 or early 2024.
"The worst period of stocks in a business cycle is six to 12 months before recession. But if that recession is 18 to 24 months [out], you're almost obligated to buy stocks, especially if the earnings are holding up," he said.
Earnings revisions by Wall Street analysts for the companies they cover "are not rolling over, they're not going down, they continue to drift higher," the strategist said, pointing out the possibility that earnings estimates could move lower.
"There is a recession in our future. The question is, 'When Bill?' If you could tell me when, I'll tell you what to do with stocks," said Golub.