How to trade Yellen, shutdown: Strategist
Janet Yellen's nomination to head the Federal Reserve requires a balancing act for investors, Brooks Macdonald Asset Management Head of Investment Strategy Gemma Godfrey said Wednesday.
On the one hand, Yellen brings three positives to the role, including support for growth strategies, a continuation of Fed Chairman Ben Bernanke's easy-money policies and a reputation for being a "clear communicator," she said.
"But by prolonging support, you're storing up inflation," she added, alluding to the Fed's $85 billion-per-month asset-purchasing program.
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On CNBC's "Fast Money," Godfrey, who has $6.25 billion in assets under management, said that the situation presented a challenge for investors.
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"The quandary is: How do you trade for something that is going to be positive short-term but store up substantial risk longer-term? And the way that we're playing it is through branded consumer names," she said. "So, what you want are companies that are going to be able to benefit from the optimism in the markets and the growth, and the renewed consumer interest and consumer demand from tackling unemployment, etc."
But, she added, investors had to focus on companies that could protect their margins. And branded names had the ability to raise prices without damaging sales.
Godfrey also noted that Congress's failure to pass a federal funding bill or approve payment of its debt obligations could be leading money to sit out for now.
(Read more: 'Not enough of a pull-back yet': Pete Najarian)
"The shutdown and the debt ceiling are providing a substantial damper on market sentiment because there is this uncertainty," she said. "And also, we just passed quarter end, so a lot of portfolio managers are saying, 'You know what? Let's take a bit of a breather. Let's see what's going to happen.'
"Markets have already rallied substantially. It's not really worth the risk, obviously, that the U.S. could default. Instead, let's wait a week or so and actually then put money back into the markets and try and change your portfolios and reallocate that way."
Trader disclosure: On Oct. 9, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Josh Brown is long AAPL; Josh Brown is long SBUX; Michael Murphy is long BAC; Michael Murphy is long C; Michael Murphy is long FB; Michael Murphy is long HTZ; Pete Najarian is long AAPL; Pete Najarian is long calls C; Pete Najarian is long calls JPM; Pete Najarian is long calls WFC; Pete Najarian is long calls INTC; Pete Najarian is long calls YHOO; Pete Najarian is long calls BBRY; Pete Najarian is long SBUX; Pete Najarian is long stock FB; Pete Najarian is long calls FB; Pete Najarian is long calls MSFT; Jon Najarian is long AAPL; Jon Najarian is long GLD; Jon Najarian is long FB; Jon Najarian is long HPQ; Jon Najarian is long KORS; Jon Najarian is long CYH; Jon Najarian is long THC; Jon Najarian is long HCA.