It’s been a tough year for markets, as investors grapple with a strong US dollar, high consumer prices and the prospect of longer-term rate hikes. “The market landscape is very much dominated by the actions of central banks and what seems to be becoming increasingly rhetorical. That will be the path of inflation, how central banks react to it, determines the direction of the market in the short and medium term,” Neil Veitch, chief investment officer at Edinburgh-based SVM Asset Management, told CNBC Pro Talks last week. He believes the macro backdrop will remain “fairly tough” for the rest of the year. “We have a lot of uncertainty about where inflation could end up through 2023 and how central banks will react to that. We’ve got third-quarter earnings coming up. . newspaper,” he said. Veitch believes the market will become “more constructive” in the first quarter of 2023 – although he thinks earnings estimates will have to fall first. “I think earnings will be the driver in the short term and right now any kind of negative surprise is being heavily punished by the market. That’s usually the pattern of behavior in a bear market – short-termism. and negative momentum prevails,” he added, echoing the comments of a range of market observers, who have long warned that earnings estimates remain too high. Inflation would also have to drop meaningfully — below 4% — before the Fed slows down to its current pace of tightening, Veitch said. Buy dip? So how should investors position themselves against this backdrop? While Veitch warned that “there are a lot of moving parts” and indicated that he will continue to be “tactically cautious,” he also sees an opportunity to buy. “With stocks falling in many cases at 50% and trading at prices above the high single or double digit, even allowing for downside risk in earnings, they are starting to look bad,” Veitch said. more attractive”. “It’s probably a little early to trigger the short-term cash flow, but if you have a medium-term outlook, some of these businesses I think are dropping a lot in price and we’ll eventually bring out the other side,” he said. More. Growth, value or both? Veitch also entered one of the key debates on Wall Street today – the battle between value and growth stocks. , likens the huge assets of American consumers to “de facto monopolies”, as well as “classic value, early-cycle businesses”, such as select retailers he believes there will be a positive reaction when the Fed starts to slow down the pace of rate hikes. There’s no point in just choosing retailers across the board. We have to try and understand what the mid-term dynamics are, what their long-term earnings potential is,” he said.In the growth space, he finds some FAANG stocks, such as Alphabet, attractive. lead on a medium-term basis.