The inventory market’s volatility soar could also be in its early phases.
Despite a bullish 2022 outlook, Wilmington Trust’s Meghan Shue expects the wild swings to ramp up as buyers digest a much less accommodative Federal Reserve and assess new dangers tied to the Covid omicron variant.
“While we’re overweight to equities, we’re holding elevated cash because we think there are probably going to be more opportunities presenting themselves,” the agency’s head of funding technique instructed CNBC’s “Trading Nation” on Friday. “Cash could be your friend over the coming months.”
The main indexes are on a dropping streak. The Dow dropped 532 factors on Friday and posted its worst day of the month. It fell 1.9% final week whereas the S&P 500 misplaced 1%.
Meanwhile, the tech-heavy Nasdaq fell 3% and is now off greater than 6% from its 52-week excessive. The Nasdaq historically has a harder time weathering a rising fee and slowing development surroundings.
“When you combine that with elevated valuations and then continued uncertainty around omicron, you just get a recipe for continued volatility and a possible correction,” stated Shue, a CNBC contributor.
Her base case requires stocks to right as a lot as 10% over the subsequent two to three months. But she refers to it as a shopping for alternative.
“Cyclicals and value still look very attractive,” she stated. “Small caps are also very beaten down. And, if we do move beyond omicron, we could see a rally there.”
Overall, Shue, who oversees $152 billion in property, is optimistic on the U.S. and worldwide markets. According to her agency’s bullish 2022 forecast, inflation will normalize, provide chain pressures will ease and labor market participation will choose up.
“We’re going to be moving back into a reacceleration phase of the economic cycle,” she stated.
Last month, Shue instructed “Trading Nation” her agency had its greatest obese in stocks ever.
“Stocks [are] still expected to be one of the strongest performing asset classes,” Shue stated.