As a record amount of money enters the market, Wilhanton Trust’s Meghan Shue sees a disturbing trend.
Shue, which oversees nearly $ 136 billion in assets, is worried that retail investors are rushing into high-risk stocks and cryptocurrencies that offer few benefits – if any.
“It’s a bit of a follow-up to returns in the wrong areas. It’s also a bit of a follow-up to what’s already happened,” CNBC’s head of investment strategy for CNBC Trading Nation said on Friday. “One thing we need to be careful about is not extrapolating what we’ve seen in the last three months into the future.”
Shue’s warning comes after Bank of America’s latest weekly report found that investor inflows had reached a record high. Its latest data show that $ 58 billion has gone into global action.
“What we saw from those Bank of America data are record inflows into large US capital in the technology sector,” said Shue, a CNBC contributor. “But less attention is being paid to areas that we believe offer better potential for future returns.”
Shue’s concerns also apply to speculative assets involved in this year’s Reddit-induced retail mania, which is accumulating lower-quality stocks – as well as bitcoin. At the close on Friday, the cryptocurrency has risen by about 65% since January 1 and by 360% in the last 52 weeks.
“The money is coming out of the sidelines and it seems more speculative than it has been for years,” Shue said in a special note to Trading Nation.
Rather than making returns to areas that have already seen larger sudden movements, Shue urges investors to target economically sensitive stocks, small capital and emerging markets. The chronology of his investment is 9 to 12 months.
“There is more room for improvement in terms of long-term recovery,” Shue added.
In the case of emerging markets, she argues that the group usually performs well in the early stages of global economic expansion.
“You need to have more exposure to cyclicals and more value than you did last year,” she said.
Shue considers it a marketplace, the launch of the Covid-19 vaccine will accelerate in the next few months and will help repair the economy faster than widely anticipated.
But it does not rule out a withdrawal along the way due to high levels of euphoria in the market. In this case, Shue recommends buying a bathroom and go small.
“In the United States, the top trade is small American capital,” Shue said. “If you look at the early expansion periods, you tend to see small US caps exceed by a fairly large margin for a period longer than just a few months.”
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