Evercore says to brace for more volatility ahead of a ‘dangerous month’ as the bear market drags on

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  • The bear market will drag on as the Federal Reserve stays hawkish, according to Evercore ISI’s Julian Emanuel.
  • He warned investors to brace for a “dangerous month” where the sell-off could easily continue.
  • Market uncertainty will likely continue until the Fed stops raising interest rates, Emanuel said.

Investors should continue to be cautious with the bear market set to drag on, according to Evercore ISI managing director Julian Emanuel.

Emanuel warned that the Federal Reserve is likely to continue to be hawkish into 2023, with rising interest rates likely suppressing stocks’ growth.

“There is more work to be done in terms of hiking before we sound more of an all-clear, particularly for the equity markets,” he told CNBC’s ‘Squawk on the Street‘ Wednesday. “The Fed has really made it clear that the last thing that they want to do is get into a position where for some reason, they have to cut rates subsequently in 2023, simply because the inflation problem may not have been cured.”

Stocks rallied in July despite the Fed hiking interest rates 75 basis points for the second consecutive month. The S&P 500 rallied 8.6% to climb back above 4,000 points, while the Nasdaq jumped 14.9%.

But Emanuel advised investors to brace for a fresh bout of volatility in September.

“To us [this] is much more typical of sort of late-cycle August coming into September, which tends to be a dangerous month, type of behavior,” he said.

Emanuel advised investors to continue to act cautiously when buying and selling stocks and said it could be a good strategy to hold cash if necessary.

“As the market runs higher, you want to trim some of your position,” he said. “So again, you can be in a better position to buy weakness when it materializes.”

Read more: Evercore: Investors should buy these 15 high-growth stocks that have been oversold since the Fed’s hawkish turn – and fund the trades by selling these 16 others