What Stock Investors Should Look for Right Now: Morgan Stanley Private Wealth Exec

Investor portfolios would benefit from focusing on stocks with earnings resilience, Sherry Paul, Morgan Stanley Private Wealth Management managing director and senior portfolio manager, suggested Wednesday, noting that the market is shifting from a willingness to pay a premium for growth equities.

“What’s most important right now is to center portfolios on stocks that bring the characteristics of earnings resiliency,” she said on CNBC’s Squawk Box. At the same time, Paul suggested investors buy “deeply discounted” growth and tech companies.

“The opining about the next market correction is centered on earnings. And so that logic loop would bring you back into owning sectors of the market that tend to perform well, that have earnings resiliency, so that’s health care, consumer staples and utilities,” she said.

The eventual “portfolio pivot” requires an understanding long term that “this is a market now moving away from a willingness to pay premium for growth and instead paying a premium for earnings resiliency and dividend income growth,” Paul added.

The liquidity strategy in a portfolio should allow investors “to move very dynamically on the front end from this earnings resiliency theme” and on the back end recognize the potential for rate cuts down the road, she said.