If you can withstand the market’s wild swings, Wilmington Trust’s Meghan Shue believes it’s an ideal time to put cash to work.
It may seem counterintuitive, but she’s more comfortable investing in stocks now than earlier this summer when Wall Street was calmer.
“It’s actually more unsettling when it appears that everything is good and the skies are clear,” the firm’s head of investment strategy told CNBC’s “Trading Nation” on Friday. “It could be good to have some risks on the horizon.”
Even though she acknowledges there’s no shortage of issues from the Covid-19 delta variant surge to Federal reserve policy to inflation, Shue is confident they won’t derail the economic recovery or have a long-term negative impact on the market.
“Volatility we’ve been seeing in the market is somewhat refreshing actually because we’ve had a very, very low volatility environment,” she said. “Typically, you see a 5% to 10% pullback [each year.] It’s been over ten months since we’ve seen anything more than at 5% pullback.”
Even though the Dow, Nasdaq and S&P 500 had a positive session on Friday, the three indexes ended the week lower. The Dow broke a three day losing streak, and the tech-heavy Nasdaq saw its best day in a month.
Shue, who oversees $141 billion in assets, notes it’s crucial for investors diversify and have at least a 9 to 12 month time horizon due to the choppiness.
“We don’t think it’s really prudent to try to time the ebbs and the flows and the back and forth of that particular trade,” said Shue, a CNBC contributor.
Her top plays are financials, energy and materials because they’re positioned to profit from economic growth and should reap benefits from rising interest rates.
“We do have a tilt towards cyclicals and value,” she noted. “We expect that the first rate hike is no sooner than the end of next year or the beginning of 2023. And, I think the economy and the markets will be in a good place to handle that.”
She also sees parts of consumer discretionary getting a boost from a strong big back-to-school and holiday spending season.
“The consumer is in a very strong spot,” she said.
And, it may not be one of her top spots to invest, Shue wouldn’t forget about growth either.
“Stay in some technology and growthier parts of the market as well,” Shue said. “Spots in health care and pharma we like.”