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Contrarian trades that will withstand market volatility: Meghan Shue

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Wilmington Trust’s Meghan Shue is out with a contrarian playbook designed to help investors grab profits during volatility.

Even as correction forecasts increase and risk appetites slump on Wall Street, she lists overweighting stocks as her first recommendation for those with 9 to 12 month time horizons.

“Over that time frame, the economy is likely to perform at above trend rates — being supported by consumer savings, cap-ex and an inventory rebuild.,” the firm’s head of investment strategy told CNBC’s “Trading Nation” on Friday.  “So, we think stocks are well-positioned to outperform bonds.”

Next, Shue emphasizes buying emerging market stocks. It includes one of the Street’s most unpopular spots right now: China, which is getting hammered by new regulations targeting industries including big tech, crypto, and casinos. Plus, it’s dealing with the fallout of Chinese property developer Evergrande’s debt crisis.

Shue said that China is at high risk. Shue stated that property weakness can put some pressure on the economy. We believe regulatory risks have been priced in to some extent at the moment. Chinese stocks are down by 30% in February.

Third, Shue, who oversees $141 billion in assets, believes investors should overweight cyclicals and temper their enthusiasm for technology stocks. Her top picks are financials, industrials, energy and materials.

Shue, who is a CNBC contributor, said that we are also overweight international developed equities. These have a more cyclical bent to them and can benefit more from an economic recovery.

Her base case is global re-openings interrupted by the Covid-19 Delta variant surge will resume in the fourth quarter, which kicks off this Friday.

Shue is planning to make a fourth play, which involves broadly overweighting commodities in light of the ongoing impact on solid demand and inventory rebuilding as well as inflation.

Shue declared, “That is a consensus view on transitory inflation.” Shue stated, “While we believe inflation pressures will decrease as we enter 2022 we still think there’s upside risk… We’re adding this as an insurance policy.”

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