Wilmington Trust’s Meghan Shue sees a worrying trend as a record amount flows into the market.
Shue, who manages nearly $ 136 billion in assets, is concerned that retail investors are plunging into stocks and cryptocurrencies that are high risk and few, if any, benefits.
“It’s about tracking returns in the wrong areas. It’s also about tracking what’s already happened,” the company’s head of investment strategy told CNBC’s Trading Nation on Friday. “One thing to be careful about is not to extrapolate what we’ve seen in the past three months into the future.”
Shue’s warning comes after Bank of America’s latest weekly report found that investor inflows had hit all-time highs. The latest data shows that $ 58 billion went into global stocks.
“What we saw from this Bank of America data is record inflows into US large caps in the tech sector,” said Shue, a CNBC official. “However, less consideration is given to areas that we believe have better potential for future returns.”
Shue’s concerns also apply to speculative assets involved in this year’s Reddit-induced retail frenzy, which are pumping up lower quality stocks as well as Bitcoin. At the close of trading on Friday, the cryptocurrency is up 65% since January 1st and 360% in the past 52 weeks.
“Money is coming off the sidelines and looking more speculative than it has been in years,” Shue said on a special note on Trading Nation.
Rather than focusing on areas that have already seen strong moves, Shue urges investors to target economically sensitive stocks, small caps and emerging markets. Your investment period is 9 to 12 months.
“There is more room for long-term catch-up,” added Shue.
In the case of emerging economies, she claims that the group typically does well in the early stages of global economic expansion.
“They must be exposed to more cyclicals and value than they did last year,” she said.
Shue is a market bull and believes Covid-19 vaccine use will accelerate over the next few months and help fix the economy faster than widely expected.
But it does not rule out a withdrawal on the way due to the high market euphoria. In this case, Shue recommends buying the dip and getting small.
“In the US, the US small cap is the most important trade,” Shue said. “If you look at early periods of expansion, you see that US small caps tend to outperform by a large margin for more than just a few months.”
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