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Chasing the market higher is a bad idea right now, and investors should turn to safe-haven sectors instead, investor Sarat Sethi warned. “Inflation is coming down but is still embedded in our system,” Sethi, managing partner at DCLA, said Thursday on CNBC’s “Squawk Box.” “I think as an equity investor, one needs to be really careful here and not chase some of these rallies, especially for stocks that are looking for lower discount rates.” Sethi’s comments came after the latest inflation data raised hope the Federal Reserve could soon end its rate-hiking campaign. The consumer price index rose 3.2% in July on a year-over-year basis, slightly less than the Dow Jones consensus estimate of 3.3%. Stocks rose on the back of the data, with the Dow Jones Industrial Average trading more than 400 points higher at its session peak. .DJI 1D mountain Dow Industrials intraday That said, Sethi advised investors should look to companies that are going to grow and have proper asset allocation within them, adding that diversification into areas like health care, consumer staples and commodities is a reliable strategy. “Those are areas that — with rates where they are, and a potential slowdown but demand-supply exceeding — you wanna be in. Areas where you have pricing power and solid balance sheets,” he said. Sethi highlighted major copper producer Freeport-McMoRan as a strong play. The stock has added 12.1% this year. Freeport’s second-quarter results, posted in late July, beat the Street’s expectations in revenue but fell slightly short in expectations for earnings per share. Haleon and pharmaceutical giant Johnson & Johnson were also mentioned by Sethi. Last year, GSK spun off Haleon to become the world’s biggest standalone consumer health business . Haleon, which is home to brands including Sensodyne toothpaste and Advil painkillers, raised its annual organic revenue growth forecast last week as it bets demand for household brands will persist. The stock rose 2.5% on Thursday. Johnson & Johnson is down 2% in 2023 but has risen more than 3% in August. On Thursday, J & J-owned Janssen Pharmaceuticals announced the Food and Drug Administration had approved its blood cancer therapy Talvey. “What scares me is that investors are still chasing the same stocks that have worked for the last 10 years, and I think the whole time frame has changed, especially as we look at de-globalization … where we are compared to the rest of the world,” Sethi said. “I think times have changed but we haven’t really adjusted.”
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