After bouncing back strongly from the Brexit selloff, the S&P 500 is up over 6% thus far in 2016. Jimmy Lee, CEO of the Wealth Consulting Group, sees the index rising as much as 3% higher to 2240 before the end of the year. That said, if earnings do not rise to support those levels, he said the market could see a correction, and a ‘meaningful one’ at that. ‘We have not had a bear market since 2009 so I wouldn’t be surprised if we saw a shock at those levels,’ said Lee. ‘I’d keep cash on hand to buy into this if it happens.’ In the meantime, Lee said owning defensive sectors like consumer staples continues to be ‘a smart move’. The consumer staples sector is up around 8% thus far in 2016, primarily due to its healthy dividend yield. He is also positive on the multi-family housing sector as a demographics play on baby boomers downsizing, the workforce having to rent, and millennials still drowning in debt. ‘We prefer non-traded REITs and we like that because with interest rates rising it could potentially have a negative effect on the publicly traded REIT sector,” said Lee. Lee said he remains cautious on international equities due to the Brexit and what could come next. ‘I don’t think many other countries will following the U.K.’s path, but the idea it could happen will keep the markets volatile,’ said Lee. ‘For the long-term, emerging markets are an asset class investors should own and the Brexit has helped create some buying opportunities there as well.’ Finally, when it comes to fixed incomes, Lee advises investors stick with high quality bonds and avoid chasing yield. ‘High yield bonds act a lot like equities, they are highly correlated so if we get a downturn in stocks those types of bonds won’t hold up,” said Lee, who is opting for high quality corporate and municipal bonds instead.
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