Bryn Mawr’s Jeff Mills suggests the market is at a critical crossroad — and it has little to do with earnings season.
Rather, it’s the future of additional virus aid that would come from Capitol Hill.
According to Mills, market leadership depends on it.
“Multiple times this year we’ve had discussions about are we rotating away from growth and into value,” the firm’s chief investment officer told CNBC’s “Trading Nation” on Monday. “Right now, all of that stems from stimulus talks.”
Without having a clear answer, Mills warns it’s too difficult to determine the economic recovery’s path, It’s a situation, he warns, that will likely burn short-term investors.
‘Being a trader right now is really difficult’
“Being a trader right now is really difficult,” Mills said. “Trying to figure out where you want to be in the near-term, it’s really driven by the whims of the daily headlines. Whether or not we get stimulus or not. Whether we get good news on vaccine treatments or not.”
Mills sees it as a toss-up.
“Permanently unemployed continues to rise. We are seeing cracks in consumer incomes. So, the question is do those cracks get filled with additional stimulus,” said Mills. “If they do, I think the rotation could happen quicker. But if they don’t and they have to heal on their own, then I think you have this default trade back to growth.”
So, Mills’ advice is to focus on having a long-term horizon and be less concerned about daily headline risks contributing to “whipsaws” in the market.
“We do want cyclicality, and we do want to tilt toward value in our portfolios,” he said.
Mills, who oversees $17 billion in assets, is cautious on 2020’s popular stay-at-home plays.
“Be underweight the mega cap growth trade,” he said. “That’s overvalued, and you will see valuations come down.”
Mills also believes it’s too early to consider some of the biggest laggards.
“You probably want to stay away from the other tail which are airlines, cruise lines [and] energy — the really distressed deep value stuff,” Mills added. “Find yourself somewhere in the middle. We like industrials. We like materials.”