Meghan Shue, Wilmington Trust, has a contrarian playbook that will help investors make money in volatile markets.
She recommends overweighting stocks to anyone with a 9-12 month time horizon, even as Wall Street risk appetites decline and correction forecasts rise.
"Over that period, the economy will likely perform at above trend rate being supported by consumer saving, cap-ex, and an inventory rebuild," said the head of investment strategy at the firm to CNBC's Trading Nation on Friday. We believe stocks have the potential to outperform bonds.
Shue also recommends investing in emerging market stocks. It also includes China, one of the most unpopular spots on the Street right now. New regulations are affecting industries such as big tech, crypto and casinos. It also has to deal with Evergrande, a Chinese property developer.
Shue stated that China's risks are certain to be high. Shue stated that property weakness can put some downward pressure on China's economy. We believe regulatory risks have been priced in at least partially at this stage. Chinese stocks are down 30% from February."
Shue, who manages $141 billion of assets, says investors should be more cautious about cyclicals than they are about technology stocks. She recommends financials, industrials and energy as her top picks.
Shue, a CNBC contributor, stated that "We're also overweight international developed equities" because they have more of an cyclical bent to them and are more likely to benefit from a global economic revival.
Her base case involves global reopenings that were interrupted by the Covid-19 Delta variant surge. These will resume in the fourth trimestre, which begins this Friday.
Shue's fourth strategy is to overweight commodities due to the continuing impact of solid demand and inventory rebuilding, inflation, and other factors.
Shue stated, "That transitory inflation view seems pretty much consensus." "While we believe inflation pressures will decrease as we move into 2022 we still think there is some upside risk... We're adding this as a hedge."
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