Sarat Sethi, managing partner at DCLA, and Stephanie Link, chief investment strategist and portfolio manager at Hightower were on CNBC to discuss what they’re seeing in the current markets. Let’s discuss what they said.
Rotation into growth stocks
On the increase in growth stocks, Link said:
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“I think you have had a rotation in the marketplace back into growth and a little bit of a pause on value. The Russell 100 growth is up now 6% year-to-date but the value index is up 16%. So, there is a little bit of catch going on here.”
She further added that it’s a macro call wherein investors are talking about if we are at peak growth, is the inflation transitory or not and if the Fed is behind the curve.
She believes the economy is strong and will continue to do well with M2 money supply up 30% year-to-date and there is also an infrastructure package in the works. There is a lot of stimulus in the financial markets which should continue to support the economy.
What about the rise in AMC and GME?
Shares of the so-called meme stocks — AMC Entertainment Holdings Inc (NYSE: AMC) and Gamestop Corp. (NYSE: GME) — have been rising this week potentially fueled by the Reddit board WallStreetBets. AMC is up 63% while GME is up almost 38% so far this week.
“These are speculative growth stocks. Yes, they are growth stocks but they have speculation in front of them,” said Sethi on AMC and GME. There are plenty of other areas in the market that we can invest in that I think have a longer tail end.”
He suggested that investors should make sure that the speculative stocks are not an overarching part of their investment portfolio.