Countercurrent trades that will withstand market volatility: Meghan Shue
Wilmington Trust’s Meghan Shue came out with a contrarian playbook designed to help investors capture profits during volatility.
Even as correction forecasts rise and risk appetite collapses on Wall Street, she cites overweight stocks as her first recommendation for those with a 9 to 12 month time horizon.
“During this period, the economy is expected to operate at above-trend rates – supported by consumer savings, capital spending and a restocking,” the head of investment strategy said on Friday. from the company to CNBC’s “Trading Nation”. “So we think stocks are well positioned to outperform bonds.”
Next, Shue focuses on buying emerging market equities. It includes one of the most unpopular places on the streets right now: China, which is hammered by new regulations targeting industries such as high tech, crypto and casinos. In addition, it deals with the fallout from the debt crisis of Chinese real estate developer Evergrande.
“The risks are certainly high in China,” Shue said. “Certainly, weak real estate is putting some downward pressure on the economy. But we think regulatory risks are at least factored somewhat at this point. Chinese stocks have been down 30% since then. February.”
Third, Shue, who oversees $ 141 billion in assets, believes investors should overweight cyclicals and temper their enthusiasm for tech stocks. Its main choices are finance, industry, energy and materials.
“We are also overweight developed international stocks which are more cyclical and tend to benefit more from a global economic recovery,” said Shue, a CNBC contributor.
Its baseline scenario is that the global reopenings interrupted by the wave of Covid-19 Delta variants will resume in the fourth quarter, which begins this Friday.
Shue’s fourth strategy is to significantly overweight commodities due to the continued impact of strong demand, restocking and inflation.
“This take on transient inflation is pretty much a consensus,” Shue said. “While we also believe inflationary pressures will ease as we head into 2022, we believe there is upside risk… So we are putting that in place as a hedge.”