Meghan Shue of the Wilmington Trust opens her playbook for the second half of the year – which starts on Thursday.
Her strategy includes over exposure to cyclicals, and she prefers financials, energy, commodities, basic materials and industrials.
“We see that the economic recovery continues and gives the stocks a tailwind,” said the company’s head of investment strategy to CNBC’s “Trading Nation” on Friday.
Unless there is a dramatic sell-off this week, the market will begin the last six months of the year with record highs.
The S&P 500 has just completed its best week since February, closing at 4,280.70 – an all-time high. The Dow closed the week 3.4%, its best weekly performance since mid-March.
The tech-heavy Nasdaq closed a little lower on Friday. But it’s up 2.35% for the week.
Shue is optimistic about the broader market, but also predicts turbulence.
“We expect a consolidation, maybe a retreat from here,” said Shue, a CNBC official.
Shue, who manages $ 141.5 billion in assets, is neutral on growth stocks, especially big tech. She sees the group as an important part of a diversified portfolio. Shue would avoid getting too deep into the group, however, as she expects a rising 10-year Treasury yield will act as a headwind. According to Shue, it should reach at least 2% in the next 12 months.
“It’s really important not to forget about technology”
“Technology is really a long-term story. So there could be some challenges if our interest rate view works out. But it’s such an integral part of the economy, ”she noted. “It’s really important not to forget about technology, even if things may get a little restless in the next few months.”
Shue expects the record rally to weaken over the next six months. She sees low to medium percentage increases.
“All the signs we have in economic data so far indicate that we are likely to be at or just above the peak rate of economic activity this cycle,” Shue said. “We are probably moving into a slowdown phase.”
However, Shue suggests that this shouldn’t scare investors.
“The slowdown could actually still be above trend growth for the US and the global economy,” she said.
Shue is currently underweight in consumer staples, utilities and REITS, which are considered defensive stocks.
“It’s been a pretty incredible run in the last 12 months and we’ve clearly bounced off the rock bottom,” said Shue.
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