Stocks are on a roll this year. The tech-heavy Nasdaq is up 35% and the broader S & P 500 ‘s not far behind despite a relentless rise in interest rates by the U.S. Federal Reserve. However, according to Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, these are all reasons to be a “little cautious” following the busiest week for earnings. “The stock market has done very well, and sentiment is much higher than it was at the beginning of the year, and high beta stocks, extremely risky stocks have done very well. All reasons to get a little cautious on the market,” Slimmon told CNBC’s Squawk Box Asia Thursday. Microsoft and Alphabet kicked off earnings season last week for the mega-caps, while Apple and Amazon are set to report this week. “I am not negative on the mega-cap tech stocks,” Slimmon said, acknowledging Microsoft’s strong results . “I think some of them like Microsoft just was overbought, going into the quarter, and so that’s why there was a pullback.” Microsoft shares declined by about 4% last week after its quarterly revenue guidance misses expectations. MSFT YTD line Stocks on the radar The portfolio manager added that Microsoft and AI chip stock Nvidia are on his radar as potential investments, but not “until earnings season is behind us.” Slimmon pointed out that the broadening of investors’ interests is also likely at play, adding further selling pressure to Big Tech stocks. For instance, while the Nasdaq has been volatile during the earnings period so far, the Dow Jones Industrial Average rose for 13 consecutive sessions. “Investors are looking for ways to play the market that have been on the sidelines and certainly, there’s just many stocks that have not participated,” he explained. Slimmon’s isn’t solely focused on mega-cap stocks, however. He suggested the recent outperformance of value stocks and commodities might be tied to both the recovery in the Chinese market and the recent visit to the country by the United States Secretary of the Treasury, Janet Yellen. He speculated whether China could be planning further stimulus measures ahead, which could benefit U.S. industrial stocks. In addition, Slimmon also anticipates additional consumer-focused relief measures in the U.S. ahead of next year’s Presidential elections, potentially boosting consumer strength. Reflecting that view, the Morgan Stanley investment manager said steelmaker Nucor Corp , and financials JPMorgan and Ameriprise Financial were among the other stocks he liked.
This story originally appeared on CNBC
