Amanda Agati of PNC Financial predicts the fall of the retail frenzy.
When the government begins to eliminate stimulus policies designed to help the country weather the pandemic, the company’s chief investment officer believes retail investors will be reluctant to invest new money.
“As we start to see this fiscal cliff appear on the near term horizon, let’s call it September and [as] extended unemployment benefits are starting to fade, I think the craze around retailing will start to fade, “she told CNBC’s” Trading Nation “Wednesday.
The impact could help tip the highly valued market into a 5-10% pullback, according to Agati.
“We have to be really realistic”
“We have to be really realistic about how big and how fast the market is going up and where valuations are going,” she said. “The backdrop for valuations is stretched by all standards: historical averages and others.”
On “Trading Nation” in early June, she recommended preparing for larger-than-normal price fluctuations. Agati attributed the forecast to high valuations, Federal Reserve chatter and the end of stimulus policies.
The Dow Jones lost 324 points or 0.92% on Wednesday. The S&P 500 also struggled, falling 0.46%.
âWe started to see this rally wear out a bit here and take hold,â said Agati.
Agati also lists Covid-19 variants and slower earnings growth as the main remedial risks.
âThe key to the way forward is definitely earnings growth and positive reviews,â she said. “We are starting to see some slowdown in terms of revisions for 2022. So the key to keeping the market rally fueled is not just to hit that high bar in terms of profit growth, it is well above it.”
Due to concerns, Agati’s main game is to look overseas to emerging markets.
âI feel a bit like a record broken because it’s really been a story for us in 2021,â said Agati. “He is truly the brightest star in the universe of equity asset classes.”
She does not let the tensions surrounding Beijing regulators targeting Chinese companies listed in the United States derail the strategy. Agati sees uncertainty primarily as an excess of feeling.
âThe earnings growth environment is also very strong,â Agati said. “This relative valuation gap compared to the developed world is really appealing here.”
The space-tracking iShares MSCI Emerging Markets ETF is down 4.2% in the past month. So far this year it is up 1.5%.