If the market’s document rally continues into yr finish, PNC Financial’s Amanda Agati predicts value shares will lag and growth shares will play a dominant function.
Agati, the agency’s chief funding officer, blames a slowing economic system and earnings — in addition to the financial and financial coverage backdrop.
“We are absolutely bullish on the growth-oriented side of this equation,” she instructed CNBC’s “Trading Nation” on Monday. “There’s a lot of runway left.”
Agati, who has $183 billion in property beneath administration, believes traders will unquestionably pay up for growth shares, which incorporates Big Tech. She expects the group to get a lift from a Federal Reserve which can doubtless maintain charges regular for longer than Wall Street thinks.
“We’ll start to see supply chain disruptions settle down. We think the optics around inflation ratings year-over-year is going to settle down,” she mentioned. “The consensus thinks that inflation is going to run so red hot that it’s going to force the Fed’s hand to both taper and raise rates earlier in 2022. We just don’t see that.”
And neither does the inventory and glued earnings markets, based on Agati.
“Usually, we’re arm wrestling between which one is the right signal,” Agati mentioned. “Both sides of the equation are signaling that inflation is likely to be much more transitory in nature, and so you’re seeing the market price that in.”
Overall, Agati bullish on the broader market. However, she believes the subsequent two months will get uneven as a result of coverage uncertainty and a revved up rotation into growth.
“We’ve been cautioning our clients and investors to buckle up heading into year end,” she mentioned. “Significantly, higher corporate tax rates and even significantly different changes on the personal side could definitely lead to putting the brakes on this market rally.”
But she suggests traders mustn’t sit on their arms. Within the growth commerce, Agati likes the Invesco QQQ Trust, an ETF which tracks the Nasdaq 100 and consists of Apple, Google and Microsoft.
“On the Nasdaq 100, they just continue to put up really strong fundamental numbers, and we think that’s going to carry into 2022,” she mentioned. “It’s not really a stay at home trade any more. It’s just follow the tech, follow the innovation and follow the growth in a slightly slower growing world.”
Agati additionally sees alternatives in rising markets.
“We’ve seen a fairly significant reset from a sentiment perspective in terms of emerging markets this year. But it hasn’t impacted the fundamental story,” Agati mentioned. “We actually think on the EM side of the trade, the valuation story is really driving an attractive opportunity.”