Wilmington Trust’s Meghan Shue warns snap decisions during market volatility spikes will trap investors in losing trades.
According to the firm’s senior investment strategist, reacting to every U.S.-China trade war development and taking on large positions are two of the worst things they can do right now.
“For long-term investors, to chase those headlines risks missing out on say very good days, maybe locking in some losses on the bad days and eroding your portfolio value — particularly after taxes,” she told CNBC’s “Futures Now” on Thursday.
Shue said also going all in on stocks is a recipe for pain.
“The other thing that we would caution against is taking large bets in a portfolio,” she added.
Shue, who has almost $98 billion in assets under management, has been taking a neutral approach to investing since May. After being overweight on stocks for years, she decided the fallout from the ongoing trade tensions was too risky.
“We are long-term investors. So, we reduced risk back in May when it became clear we were further away from a deal than we had originally thought,” said Shue.
She’s now overweight cash and diligently searching for opportunities within sectors that could benefit from the government’s protectionist policies. Some examples include defense contractors and software.
Whether there’s a deal or not, Shue expects the market’s wild swings will continue for months.
“There are sure to be more ups and downs along the way,” Shue said.
On Friday, the S&P 500 and tech-heavy Nasdaq closed up almost 2% for the week while the Dow was 1.5% higher. The three indexes are up between 4% and 6% over the past three months despite the market’s disappointing August.