The stock market could pull back up to 7% before the end of 2020 — but investors should use it as a buying opportunity, says top Wall Street market strategist
- BNY Mellon's Liz Young told CNBC on Monday she is expecting up to a 7% pullback in stocks before the end of 2020, though investors should use this as a buying opportunity.
- "You really have to look out three to six months, and think to yourself: are things going to be better than they are today? And I think the answer to that is yes," said the director of market strategy.
- While the end of 2020 will be "a little bumpy," and the first quarter of 2021 will face lingering effects from the current wave covid cases, a healthy recovery in the economy and stock markets will begin in the second quarter of next year, Young said.
- Visit Business Insider's homepage for more stories.
Major stock indexes are reaching record highs, but BNY Mellon's Liz Young sees a bumpy finish to 2020. She told CNBC on Monday that stocks could pull back up to 7% before the end of the year, but investors should buy the dip as the economy is set to recover in 2021.
Both the Nasdaq and S&P 500 closed at record highs on Friday, while the Dow Jones is on pace for its best month since 1987.
"We have pulled a lot forward, and there's a little bit of a risk through the end of the year that we have some of that steam come off," BNY Mellon Investment Management's director of market strategy said.
Incoming economic data could be the factor that rattle markets, Young added. A slew of jobs data, including November payrolls and the unemployment rate for the month will be released this Friday.
But Young told investors they can and should look through any market pullback, and use it as an opportunity to buy stocks at a discount.
"If we have a little bit of a wobble, we'll call it three to seven percent...I would see that as a buying opportunity," she said.
"You really have to look out three to six months, and think to yourself: are things going to be better than they are today? And I think the answer to that is yes," added the strategist.
While the remainder of 2020 will be "a little bumpy," and the first quarter of 2021 will face lingering effects from current rising covid cases, a healthy recovery in the economy and stock markets will begin in the second quarter of next year, Young said. This recovery is likely to begin abroad before it kicks off in the US, she added.