Josh Brown warns we could break the October lows, but has stocks to buy for second half

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Josh Brown issued a warning for investors on Tuesday, noting that new bear market lows could soon be reached. “You could divide up everyone on Wall Street right now in one of two camps. Do we break the October lows or do we not? I think we break the October lows,” Brown, the CEO of Ritholtz Wealth Management, said Tuesday on CNBC’s ” Halftime Report .” Stocks dropped to their bear market lows in October 2022, with the S & P 500 dipping below the key 3,500 level, as investors weighed the likelihood of further interest rate hikes from the Federal Reserve to fight persistent inflation. Some better-than-expected corporate reports helped markets rebound to close the month nearly 8% higher. Brown pointed to one view held among even bullish strategists on Wall Street that stocks will sell off in the first half of 2023, before rebounding in the second half of the year. “It’s so much more rational to be in that camp, given all the headwinds, all of the negativity,” Brown added. “And then you have the second half of the year, if you missed out on the bottom or whatever, to do whatever you need to do to catch up.” Still, he said there are buying opportunities in names such as insurance group Chubb , beauty retailer Ulta Beauty and electric utility company NextEra Energy . Not only does property and casualty insurance company Chubb have pricing power in 2023, the stock is also one of just 11 stocks trading in the S & P 500 that are currently within 5% of their all-time highs, according to Brown. “This stock is on the verge of breaking out,” Brown said. The entire property casualty group looks great. I talked to insurance brokers, they tell me what they’re hearing from the carriers. Expect huge increases in 2023 on premiums. And guess what, doesn’t matter what they are, people are going to pay them, because what choice do you have?” Meanwhile, Ulta Beauty is a “raging bull stock” that could continue to reach new highs in 2023 even after outperforming last year, Brown said. Shares of Ulta gained more than 13% in 2022, outpacing the S & P 500’s roughly 19% decline, as investors piled into what is considered a recession resistant business. Lastly, NextEra Energy is a beneficiary of the Inflation Reduction Act that has an “incredible growth engine,” while also offering a 2% dividend yield, according to FactSet. Brown named aerospace and defense as his favorite sector for 2023, saying equities in the sector will serve as an hedge for growing geopolitical risks this year. Other members of the panel named their top picks for this year. Hightower’s Stephanie Link considers General Electric, Broadcom and Starbucks her favorite names for 2023. Virtus Investment Partners’ Joe Terranova named Microsoft, Prologis, Texas Instruments his top buys.