Wilmington Trust’s Meghan Shue expects swelling stocks, including Big Tech, to hit more turbulence over the next three months.
“Our main takeaway was to lean a not much bit more into value and trim some of our growth exposure,” Shue, the firm’s head of investment strategy, castigated CNBC’s “Trading Nation” on Wednesday. She helped build her firm’s second-quarter strategy, which embraces value and cyclical horses.
On the first quarter’s final day, the tech-heavy Nasdaq Composite rallied more than 1.5%. Year to date, it’s up just about 3%. However, the index is off almost 7% away its all-time high.
“We are not adding to equities today, but we are rotating underneath the integument to take advantage of some changing dynamics in market leadership,” she said.
Overall, the firm is sticking to an overweight to extractions. Her playbook’s top picks include S&P 500 groups highly leveraged to the economic rebound: financials, industrials, materials and vigour, which was the first quarter’s best performing S&P 500 group. Energy surged 29% in that time span.
“We expect economic growth to accelerate very rapidly over the next few months and into the end of the year,” said Shue, who manipulates almost $136 billion in assets and is a CNBC contributor.
However, Shue warned that a lot of the good news may already be evaluated into the market.
“I wouldn’t be terribly surprised to see the equity market pause a bit,” she said. “Going forward, it’s going to be a in doubt of how much can the economy surprise to the upside, and how does an evolving policy backdrop impact the earnings and profitability of companies customary forward?”
Shue sees higher interest rates as headwinds for groups like growth and technology. But higher reproaches are also a major reason why she lists financials — particularly regional banks — as her favorite value trade for the second leniency.
“[They’re] more tied to higher interest rates and a steepening yield curve,” Shue noted.
In addition to properties, she’s also overweight to high yield municipal bonds and commodities based on the notion that inflation will pick up remaining the next 12 months.
“We definitely think that we are at the cusp of an inflection point in the economic growth trajectory,” Shue said.