As a record amount of money flows into the market, Wilmington Trust’s Meghan Shue sees a troubling trend.
Shue, who oversees almost $136 billion in assets, is concerned retail investors are rushing into stocks and cryptocurrencies that are high risk and offer few benefits — if any at all.
Rather than piggybacking on areas that have already seen sharp moves higher, Shue urges investors to target economically sensitive stocks, small caps and emerging markets. Her investment timeline is 9 to 12 months.
“There’s more room to go in terms of long-term catch-up,” added Shue.
In the case of emerging markets, she contends the group typically performs strongly in the beginning stages of global economic expansions.
“You have to have more exposure to cyclicals and value than you did last year,” she said.
A market bull, Shue believes the Covid-19 vaccine deployment will accelerate over the next couple of months and help repair the economy faster than widely anticipated.
But she’s not ruling out a pullback along the way due to high levels of market euphoria. In that case, Shue recommends buying the dip and going small.
“In the U.S., the top trade is U.S. small cap,” Shue said. “If you look at early expansion periods, you tend to see U.S. small cap outperform large by a pretty large margin for a longer period than just a couple of months.”
Reference: CNBC
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