Meghan Shue of the Wilmington Trust publishes a contrary playbook designed to help investors make profits on volatility.
Even as corrective forecasts rise and risk appetite weaken on Wall Street, she cites an overweight position in stocks as her first recommendation for those with a 9-12 month horizon.
"During this period, the economy is likely to develop above trend rates – supported by consumer savings, Cap-Ex and a rebuilding of inventories," the company's head of investment strategy told CNBC's "Trading Nation" on Friday. "So we believe stocks are well positioned to outperform bonds."
Shue's next focus is on buying emerging market stocks. It includes one of the most unpopular places on the street right now: China, which is rocking new regulations for industries like big tech, crypto and casinos. It is also about the consequences of the debt crisis of the Chinese real estate developer Evergrande.
"The risks are certainly increased in China," said Shue. "Of course, the real estate weakness is putting some downside pressure on the economy. But we believe regulatory risks are at least somewhat priced in for now. Chinese stocks have fallen 30% since February."
Third, Shue, who manages $ 141 billion in assets, believes investors should overweight cyclicals and dampen their enthusiasm for technology stocks. Her top picks are Financials, Industrials, Energy, and Commodities.
"We have also overweighted developed international stocks, which are more cyclical and tend to benefit more from a global economic rally," said Shue, a CNBC official.
Their base case is global reopenings, interrupted by the surge in the Covid-19 Delta variant, which will resume in the fourth quarter starting this Friday.
Shue's fourth game is to have a broad overweight in commodities in light of the ongoing effects of solid demand, inventory build-up and inflation.
"That temporary inflation view is pretty much consensus," Shue said. "While we also believe that inflationary pressures will ease in 2022, we believe there is some upside risk … so let's use this as a hedge."
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