As a record amount of money flows into the market, Wilhanton Trust’s Meghan Shue sees a worrying trend.
Shue, which oversees nearly $ 136 billion in assets, is concerned about retail investors rushing into high-risk stocks and cryptocurrencies that offer few (if any) profits.
“It’s a bit like chasing returns in the wrong areas. It’s also chasing what’s already happened,” the firm’s chief investment officer told CNBC’s “Trading Nation.” “One thing we need to keep in mind is not to extrapolate in the future what we’ve seen in the last three months.”
Shue’s warning comes after Bank of America’s latest weekly report found that investor inflows hit an all-time high. Its latest data show that $ 58 billion was spent on global stocks.
“What we’ve seen from these Bank of America data are record entries to the big U.S. capitalization, in the technology sector,” said Shue, a CNBC contributor. “But less attention is paid to areas that we believe offer better potential for future returns.”
Shue’s concerns also apply to the speculative assets involved in this year’s Reddit-induced retail mania that accumulates lower-quality stocks as well as bitcoin. At the close of Friday, the cryptocurrency has risen by approximately 65% since January 1 and 360% in the last 52 weeks.
“The money comes out of the margin and seems more speculative than in years,” Shue said in a special note to “Trading Nation.”
Instead of moving forward in areas that have already experienced strong upward movements, Shue urges investors to target economically sensitive stocks, small chapters and emerging markets. Your investment schedule is 9 to 12 months.
“There is more room to move forward in terms of long-term recovery,” Shue added.
In the case of emerging markets, he states that the group usually has a strong performance in the early stages of global economic expansion.
“You have to have more exposure to cyclicals and value than you did last year,” he said.
Shue believes it is a market bull, the deployment of the Covid-19 vaccine will accelerate over the next two months and help repair the economy faster than expected.
But he does not rule out a setback down the road due to high levels of market euphoria. In this case, Shue recommends buying the bathroom and going small.
“In the U.S., the most important trade is small U.S. capitalization,” Shue said. “If you look at the early periods of expansion, you tend to see that the small U.S. capitalization outperforms by a fairly large margin over a longer period than just a couple of months.”
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