Asset supervisor Dan Veru believes U.S. shares may undergo a sustained dip, earlier than embarking on a “highly effective rally” by the top of the yr. A broad-based rally in U.S shares in July had raised hopes of a sustained rebound for fairness markets. Talking on CNBC “Squawk Field Europe” forward of the beginning of Monday’s U.S. buying and selling session, Veru attributed July’s good displaying to better-than-expected earnings and “acceptable” third-quarter steerage. Veru, who’s chief funding officer at Palisade Capital Administration, mentioned he anticipated the current bear market rally to proceed as extra corporations report. All three main U.S. averages closed greater on Wednesday , snapping a 2-day dropping streak. The Dow Jones Industrial Common rose by greater than 400 factors, whereas the tech-heavy Nasdaq Composite jumped about 2.5%.The broad-based S & P 500 hit its highest degree since June. ‘Highly effective’ year-end rally Veru believes the inventory market stays macro-driven and will nonetheless see additional volatility earlier than the yr’s finish. “As the autumn approaches, i consider that shares may very well be weak to a brand new spherical of promoting. The autumn is often a interval of fairness weak point, however i’m involved that the complete power of upper rates of interest and quantitative tightening from the Federal Reserve may create a brand new spherical of promoting,” Veru mentioned. He famous that the complete influence of inflationary pressures and the sequence of rate of interest hikes this yr might be felt this quarter, which can translate to “larger uncertainty” for third-quarter earnings. “Additionally, the upcoming U.S. mid-term elections, excessive power costs, and provide chain points may create sufficient uncertainty to make shares weaken. I’m not positive that U.S. shares will make a brand new low, however a lot of the current good points may very well be misplaced earlier than the Nov. 2 [congressional] election,” he added. Nonetheless, Veru is predicting a “highly effective year-end rally” for shares after the autumn sell-off. “The Federal Reserve is probably going going to be carried out elevating rates of interest and inflation from provide chain points together with greater commodity costs ought to start to say no. By year-end, a brand new bull market ought to start taking us nicely into 2023 and past,” he mentioned. Sectors to personal How ought to traders place in opposition to this backdrop? Veru believes “it is time” so as to add power shares, given the current pullback within the sector. Power is the perfect performing sector on the S & P 500 by a protracted mile this yr, having gained greater than 40% year-to-date, in keeping with FactSet information. Learn extra Wall Road execs say these small caps are good buys as recession looms — BofA provides one 40% upside These shares are poised for a comeback if inflation peaks, Jefferies says Has the market hit backside? Right here’s what Wall Road has to say after U.S. shares rebound in July However the sector returned simply 5.6% over the previous month — underperforming shopper discretionary, tech and industrials — amid tumbling crude oil costs and rising recession fears. With the U.S. greenback having “seemingly peaked” within the close to time period, Veru says this bodes nicely for industrial and commodity shares. Particularly, he believes the outlook for the economic sector is “fairly good” whereas valuations are additionally wanting extra enticing. He’s additionally a fan of the well being care sector given its “defensive traits.” The sector is down 6.3% this yr, outperforming the S & P 500, which has shed practically 14% of its market cap this yr. Palisade Capital Administration manages greater than $5 billon in property as at finish of 2021.