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Time to rebalance your portfolio: advisor

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WealthWise Financial CEO Loreen Gilbert tells Reuters' Fred Katayama she sees stocks making double-digit returns again this year. For those taking profit on equities to rebalance their portfolios, she recommends some fixed income investments.

Video Transcript

FRED KATAYAMA: Stocks again making small moves Friday, with the market indexes hovering near the break-even line. Our guest, Loreen Gilbert, CEO of WealthWise Financial, senses froth in the market. Good afternoon. Welcome back, Loreen.


FRED KATAYAMA: Well, Loreen, so what are the signs of exuberance that you're seeing?

LOREEN GILBERT: Well, even today, Fred, we heard that the regulators are looking at the banking institutions as a new stress test is coming around. And in this new stress test, they're going to stress test the banks for 55% decrease in the equity markets. And what that tells us is the Federal Reserve is concerned about a froth that we're seeing in the market.

And what we're seeing is this appetite for risk. It's a risk on trade. Whether it's in SPACs, whether it's the IPOs coming in the market, everybody's looking to make some money there, because also when you look at yields on fixed income, they're so low.

FRED KATAYAMA: And we've seen some of that volatility subside, at least for this week. But given the signs of froth, as you pointed out, what sort of market returns are you anticipating this year? And are you anticipating the stocks will peak out soon?

LOREEN GILBERT: Well, we've already seen a great return year-to-date, if you look at the S&P 500, up over 4%, in the NASDAQ, up over 8. So we're seeing some amazing returns in such a short period of time, which always begs the question, at some point, will we see a correction in the markets? And we always have to be ready for that. Those are normal corrections that we would see where the market takes a breather before it can go further.

But we are anticipating, still, a positive strong stock market this year. So I'm not giving up on that. I think that we still have room to run. It's just, at this point, it's a matter of being pickier as far as where you're placing your money.

FRED KATAYAMA: Mm, how much more room to run? What sort of returns are you looking for this year?

LOREEN GILBERT: Well, you know, we're celebrating the Chinese New Year and it's the Year of the Ox. And we're glad to get rid of the Year of the Rat. And if you look at just where the S&P 500, not that we're making investment decisions based on this, but if you look at the prior two years of the Year the Ox, they've been over 20% returns in the S&P 500. So while I can't predict that, we are looking at potentially double-digit returns this year.

FRED KATAYAMA: All right. Thanks for pointing out it is the Asian Lunar New Year after all. Given that scenario that you just described, what sectors do you suggest investors get into at this point?

LOREEN GILBERT: We're looking beyond what has done so well in 2020 and looking in 2021 for some of the areas that didn't do so well. So some of the hardest hit areas, even when you look at travel, that, as we start to reopen, we see some of those areas doing much better. So when we look at consumer cyclicals, we still see that as a very positive area of the markets. Last year, it was the big surprise. And we expect that to continue. So that's certainly one area.

And another area that we like quite a bit is industrials. Looking at companies-- let's just say, like, Caterpillar that have a lot of room to run in Asia, in China, as the Chinese market continues to expand and upgrade their agricultural technology, we see stocks like that having an opportunity.

FRED KATAYAMA: Well, Loreen, we've seen value stocks outperform growth stocks of late, although that gap has sort of narrowed over the past week or two. Given that, are you concerned that some of the action in the cyclicals that they're already priced in?

LOREEN GILBERT: We still see room there, definitely. I mean, the area that I'd say we've seen such a run up in its financials. And that was an area that we had overweighted. We still like some financial names, most definitely. But looking, for instance, in financials beyond the-- the banks and looking for other areas, like payment processing, it's been kind of the fintech area that's been positive. And we see more opportunity there, too.

So I tell you, we still like value. We actually like value over growth, not saying that we're getting rid of our growth positions, but increasing those value positions.

FRED KATAYAMA: Do you feel that some investors should take some profits now and funnel some money over into the fixed income side?

LOREEN GILBERT: Well, certainly with the run up in equities, investors may find that they are overweighted in their equity exposure. But given where fixed income is, it's a matter of finding the right places. We like TIPS quite a bit. We like emerging market debt quite a bit. So there still are areas in fixed income as people are looking for more of a yield. And we do see some opportunities there. So yes, I think rebalancing your portfolio is always a good idea to keep it in line with your risk tolerance.

FRED KATAYAMA: And TIPS meaning that you're anticipating some inflation this year?

LOREEN GILBERT: [INAUDIBLE] yes, we are anticipating inflation and then the expectation has still been quite low, given-- and we think that we're going to see some more inflation kicking in.

FRED KATAYAMA: All right. Thank you, Loreen. Appreciate it.


FRED KATAYAMA: Our thanks to Loreen Gilbert of WealthWise Financial coming to us today from Dallas, Texas. I'm Fred Katayama in New York. This is Reuters, and have a wonderful weekend.