The S&P/ASX 200 Index (ASX: XJO) has recovered somewhat this month after tanking almost 10% in January.
But it's still close to 5% down for the year.
Shaw and Partners senior investment advisor Adam Dawes reckons ASX shares will bounce back.
"It's what I'm calling a mid-cycle correction," he told Switzer TV Investing.
"We're going to see some more volatility around these levels before we start to move again."
The way inflation and interest rates move will have a big impact on the near-term fortunes of the ASX 200, he added.
"Most people don't really understand what inflation means, but they can see it in their petrol prices, they can see it in their fruit and veg," said Dawes.
"That's where it's going to hurt the back pocket of the normal public and investors."
But with a medium-term rebound in mind, Dawes named 3 ASX shares that he'd pick up right now for a nice return in the months to come:
COVID or not, the planes are packed
One of the most obvious losers out of COVID-19 and its repeated waves is Qantas Airways Limited (ASX: QAN).
But Dawes notes that Australians' behaviour during the Omicron outbreak has been different to the previous waves.
"I took a plane ride last week for the first time in 2 years. And let me tell you, these planes are absolutely jam-packed," he said.
"I'm thinking Qantas is a good value play at the moment."
With Australians getting accustomed to the idea of "living with the virus", Dawes predicted domestic travel will do well for Qantas.
"The stock has been beaten around but they've come out of it — they've reduced costs, their labour figures are okay," said Dawes.
"Oil is probably a bit of a concern for the input costs, but really they've left Virgin battered and bruised."
Qantas shares closed Wednesday at $5.36. The price is up more than 7% this month.
The ASX share that loves when interest rates rise
Dawes admitted insurance is a tough game, but likes the upside in QBE Insurance Group Ltd (ASX: QBE).
"QBE does have a lot going for it at the moment," he said.
"Management is really picking themselves up and I think there's value there."
The share price has already picked up almost 14% this month. It has now grown in excess of 43% over the past 12 months.
He's not the only one who currently favours QBE. Burman Invest chief investment officer Julia Lee likes how the economic circumstances could give the insurer a real push this year.
"QBE's investment portfolio benefits when interest rates rise. And, the market is pricing in higher interest rates," she told The Bull.
"Premium revenue has been growing. Margins have been increasing."
Coal prices are shooting up
Rail freight provider Aurizon Holdings Ltd (ASX: AZJ) is the third stock in Dawes' sights.
"Coal is one of those things that's on the nose, but if you actually look at a coal chart lately, that coal price has really started to move north," he said.
"That will bode well for Aurizon."
Dawes also liked last year's $2.4 billion acquisition that diversifies Aurizon's haulage.
Aurizon shares have not recovered as spectacularly as Qantas and QBE, only up 0.84% for the year so far.
It does pay out a tidy 6.9% dividend yield though.
"Aurizon, in that big-cap space for the income going forward, I think it's a good play for value."
Investors Mutual Limited director Anton Tagliaferro last week also singled out Aurizon for praise, saying cash flow is king when interest rates shoot up.
"With interest rates rising, these stocks suddenly don't look so boring or dull as things normalise," he said.
"And as investors begin to appreciate real cash flows generated by companies in the next 2 to 3 years, as opposed to hoped-for cash flows in 10 or 20 years time."
