Market Strategist: What They Are and What They Do

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What Is a Market Strategist?

A market strategist is a financial professional who chooses which asset classes, such as stocks, mutual funds, bonds, or ETFs, to invest in. They use three broad categories to make these decisions: sentimental analysis, technical analysis, and fundamentals analysis.

Key Takeaways

• Market analysts use three major types of analytical frameworks: sentimental, technical, and fundamental.
• Contrarian analysts, also known as sentimental analysts, assume that most investors are wrong.
• Technical analysts focus on price movements reflected in charts.
• Fundamental analysts look at a company’s financial health, such as debt-to-income ratio and sales growth, to determine if it’s a good investment.

Understanding a Market Strategist

The term "market strategist" emerged in response to the need for big-house brokerages and advisors to show clients future strategies and plans in a changing market. As volatility became the norm, philosophy shifted from buy-and-hold to adaptive strategies that can profit in bull markets and protect against bear markets.

Examples of Market Strategies

Sentimental Analysts

Sentimental analysts, often referred to as contrarians, believe that markets are influenced more by investors’ emotions than rational decision-making. They base many decisions on the assumption that the majority of investors are wrong. For example, if the price of gold is trending high, these strategists might take a short position, believing that the valuable metal has peaked.

Technical Analysts

Technical analysts use data reflecting price movements, moving averages, and resistance levels to guide their investment decisions. They utilize various types of charts, including line, candlestick, point, or bar charts, to observe trends. Market timing, with regular buy and sell signals, is closely aligned with technical analysis.

Fundamentals Analysts

Market strategists who focus on company fundamentals take inspiration from successful investor Warren Buffett. They examine financial statements, size, market share, profit margins, return on equity, earnings, free cash flow, debt, and price relative to earnings and book value. These analysts believe that fundamentals are crucial and can protect against market uncertainties.

A Blend of Strategies

While the strategies mentioned are distinct, market analysts often combine them when making investment decisions. Investment banks, brokerage firms, and financial services companies frequently employ market strategists. It is important to note that, historically, market strategists have been incorrect about 77% of the time, according to William J. Bernstein’s book The Four Pillars of Investing.

What Does a Market Strategist Do?

A market strategist determines the best investing style for a specific fund or portfolio. They provide practical actions or investment recommendations based on research and market conditions.

Is a Market Strategist the Same as a Marketing Strategist?

No. A market strategist is an investment professional who manages the overall strategy of a portfolio. In contrast, a marketing strategist is responsible for a company’s advertising and marketing strategies.

How Can I Find the Best Market Strategist?

CNBC conducts regular surveys of over 500 market strategists, gathering their targets for the S&P 500 index as well as the implied EPS and P/E of the index for each year-end. You can explore the rankings here.