Bullish market will continue despite correlation risks – analyst

[silhouette form of bull on technical financial graph 3d illustration]
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Trivariate Research founder and CEO Adam Parker maintains an optimistic market outlook, citing AI productivity, dovish Federal Reserve policies, and increased market activity as key pillars supporting the bull case.

In an interview with CNBC, Parker suggested these factors will likely outweigh bearish concerns about government spending and hyperscalar capital expenditures at least through year-end.

Parker highlighted correlation risks as a significant challenge for institutional investors, explaining how semiconductors (SMH [https://seekingalpha.com/symbol/SMH]), (SOXX [https://seekingalpha.com/symbol/SOXX]), (XSD [https://seekingalpha.com/symbol/XSD]), electrification industrials, alternative asset managers, and major banks (KBE [https://seekingalpha.com/symbol/KBE]) have become interconnected in investors’ portfolios, creating potential vulnerability to market fluctuations.

Parker recommends seeking investments with low correlation to AI-focused stocks while still showing strong fundamentals. He specifically mentioned healthcare (XLV [https://seekingalpha.com/symbol/XLV]), (IYH [https://seekingalpha.com/symbol/IYH]), (IXJ [https://seekingalpha.com/symbol/IXJ]) as an underappreciated sector with potentially strong future performance.

“I think what the market’s telling me [there is] 0% chance healthcare is the best performing sector in the market the next five years, and I think the answer is 30 or 40% chance,” he said.

When questioned about handling potentially overvalued market segments, Parker expressed skepticism about valuation-based investing strategies.

“I don’t think valuation is particularly effective for picking stocks,” he said, explaining that expensive companies missing earnings targets face similar downside as cheaper companies with disappointing results.

According to Parker, investors should focus more on companies with achievable expectations rather than traditional valuation metrics. He warned that using strict valuation criteria might lead investors to sell companies benefiting from AI while buying those facing potential disruption – a counterproductive approach in the current market environment, where technological adaptation significantly influences stock performance.

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