Wilmington Trust’s Meghan Shue expects growth stocks, including big tech, to see more turmoil over the next three months.
“Our main concern was to add a little more value and reduce some of our growth exposure,” Shue, head of investment strategy for the company, told CNBC’s “Trading Nation” on Wednesday. She helped build her company’s strategy for the second quarter, which includes value and cyclical stocks.
On the last day of the first quarter, the tech-heavy Nasdaq Composite gained more than 1.5%. Since the beginning of the year it has risen by almost 3%. However, the index is almost 7% below its all-time high.
“We’re not adding stocks today, but we’re spinning beneath the surface to take advantage of the changing dynamics of leadership,” she said.
Overall, the company maintains an overweight position in equities. Her playbook’s top favorites include S&P 500 groups that have benefited greatly from the economic recovery: Finance, Industrial, Materials and Energy, the S&P 500 group with the best first quarter performance. The energy increased by 29% during this period.
“We expect economic growth to accelerate very rapidly over the next few months and through the end of the year,” said Shue, who manages nearly $ 136 billion in assets and is a contributor to CNBC.
However, Shue cautioned that much of the good news may already be out on the market.
“I wouldn’t be too surprised if the stock market paused,” she said. “Going forward, it will be a question of how much upside the economy can surprise and how an evolving political backdrop will affect corporate profits and profitability in the future.”
Shue sees higher interest rates as headwinds for groups like growth and technology. But higher rates are also a main reason she lists financial stocks – especially regional banks – as their preferred value trade for the second quarter.
“”[They’re] more tied to higher rates and a steeper yield curve, “noted Shue.
In addition to stocks, it is also overweight high-yield municipal bonds and commodities as it expects inflation to accelerate over the next 12 months.
“We definitely believe we are on the cusp of a turning point in economic growth,” said Shue.
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