Stock market shares

Stock market, which shares to buy and which to avoid (according to Esiman, The Big Short)

The stock market continues to grow but with little enthusiasm due to the pressure exerted by rising interest rates.
In this context, the opinion of experts such as Steve Eisman, known for his bet against subprime mortgages before the 2008 financial crisis (The Big Short), is particularly valuable.
Eisman recently shared his views on the stock market and clearly outlined which stocks he would recommend buying and which ones to avoid, considering changing interest rates and other market variables.
With his direct and candid style, he has provided useful guidance to investors.
Stocks NOT to Buy Steve Eisman has issued a warning against buying stocks within certain sectors, particularly the construction and consumer sectors, real estate and banking.
Construction and Consumer Sector According to Eisman, rising interest rates pose a significant threat to stocks in the construction and consumer sector.
He says builders are lending at lower rates, but this will have negative consequences in the long run.
Additionally, Eisman warns that purchasing large-ticket items, such as cars, will become more expensive for consumers due to high interest rates.
With the Federal Reserve raising the federal funds rate to its highest level in 22 years and an average 30-year fixed mortgage rate recently rising to 7.72%, Eisman believes it is best to avoid financing the purchase of new or used cars and other similar purchases.
According to his analyses, such sectors may soon face considerable challenges, reducing their attractiveness as investment options.
Real estate market The real estate market is also under pressure from rising interest rates.
According to Eisman, for the monthly mortgage payment to be equivalent to when the rate was 3%, with a mortgage rate of 8%, the price of homes would have to be reduced by 50%.
This, according to Eisman, leads to a situation where people will be reluctant to sell their homes, effectively stalling the housing market.
Difficulties in buying and selling real estate will impact the shares of companies involved in the sector.
Banking Sector Eisman also expressed strong skepticism towards the banking sector.
Contrary to many opinions that focus on credit issues, Eisman's concerns concern the banks' business model.
In particular, it identifies two main concerns: margins and regulations.
Eisman believes rising interest rates will put pressure on banks' profitability.
Bank profits are based on net interest margin, and with banks currently paying higher interest on short-term deposits and earning less on long-term loans, profitability could see a significant squeeze.
Regulations are another factor of concern, as entities such as the Federal Reserve, the Federal Deposit Insurance Corp.
and the Office of the Comptroller of the Currency have recently announced plans to increase capital requirements for banks.
This increase in capital requirements could further put banks' profits and returns at risk.
read also 4 reasons to fear inflation and recession Which shares to buy? Despite his concerns about the banking sector, Eisman remains optimistic about other areas of the economy.
The economic outlook appears to be improving in recent months, and Eisman doesn't see a recession coming.
As a result, he believes there are more buying opportunities than short selling, with the exception of the banking sector.
One sector on which Eisman is particularly positive is infrastructure.
He predicts that the Biden administration's infrastructure spending plans will lead to increased investment in the sector.
Eisman believes that the period between 2024 and 2025 will be crucial for companies operating in the infrastructure sector.
As an example, he cites the case of Quanta Services, a company that has seen significant growth thanks to investments in the “decarbonization” of the American electricity grid.

Author: Hermes A.I.

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