There are four plays to get investors through this volatile market relatively unscathed, according to one top money manager.
Right now, Jeffrey Mills, chief investment officer at Bryn Mawr Trust, is focusing on rate sensitive market groups and one area beaten down by the trade war between the U.S. and China and global recession fears.
“Rates remain low. I think you get a bid in health care. I think you get a bid in utilities even though they’re expensive,” Mills told CNBC. “You still have investors going to tech for growth. And, it’s interesting the momentum there is not in the FANG names. It’s in the semis. It’s in the software.”
Mills also made a contrarian call on emerging markets, which have been severely hampered by the slowdown overseas.
“You have to be willing to withstand a little bit of volatility as it relates to EM – obviously, in the crosshairs of the trade war, for sure,” Mills said. “But if you have a long-term horizon, I do like valuations here. I think it’s a decent entry point.”
Last Friday, China announced a new set of tariffs on $75 billion in U.S. goods after U.S. President Donald Trump issued new tariffs on $300 billion worth of Chinese goods, including on clothing, shoes, and electronics.
Trump then demanded over Twitter that U.S. companies “immediately start looking for an alternative to China,” which sent stocks falling sharply.
Mills suggested that President Trump’s tweets sabotaged what was then looking like a good day for stocks. He then reiterated that the current market backdrop is “incredibly complex,” and said that a “wait and see approach” may be the best option for many investors.
But Mills still believes the U.S. will ultimately avoid a recession and rebound, especially after Federal Reserve Chairman Jerome Powell’s speech last Friday in Jackson Hole where Powell said that the central bank would “act as appropriate to sustain the expansion.”
“Powell said exactly what he needed to say. He acknowledged the downside risks to growth,” Mills wrote in a note. “He certainly wasn’t going to guarantee additional rate cuts, but he demonstrated flexibility related to the direction of future policy.”