Beware of 'Trampling Effect' When Market Tops: Manager

Stocks struggled to hold gains on Tuesday as investors took a breather after Monday's strong upward move. So is this is a skeptic’s rally or the continuation of a bull run? Jim Lacamp, portfolio manager and advisor at Macroportfolio Advisors, and Bill Stone, chief investment strategist at PNC Wealth Management, shared their insights. (See their sector recommendations, below.)

“It’s a balloon that keeps getting bigger and bigger, you just don’t want to be there when it pops,” Lacamp told CNBC.

“The Fed is adding more booze into the punch bowl so we know that party is still on, but we don’t know for how long it will last—and we all know it’s going to have a bad end.”

Judging by the retail, regional bank and dry shipping stocks, Lacamp said the economy is still not in a recovery.

“We’re still in [the markets] but looking for signs of a top and when we see the averages not setting new highs anymore and starting to create new lows, we’ll start to roll over and lighten up even more,” he said.

“You have to be careful because everybody is in the same trade and if everybody rushes out at the same time, it’s going to be a trampling effect and you do not want to be behind that,” Lacamp said.

Counterpoint: 'Sustainable'

In the meantime, Stone said he doesn’t believe the markets are overheated yet.

“We believe the economic recovery is sustainable, so we want to be towards the more cyclical sectors that are going to benefit from the continued economic global recovery,” he said.

Stone said he likes areas such as technology because it’s levered to the global economy coming back and it has some downside protection as techs don’t have a lot of debt.

“We found technology companies have been able to get the consumers to buy what they’re selling, even in a bad economy.”

Stone Likes:

Technology

Selected Materials

Financials

Industrials

Lacamp Likes:

U.S. Technology

Metals

Commodity/Natural Resource-Related Stocks and Countries

Brazil, India, Taiwan, Indonesia

Corporate Bonds

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Disclosures:

No immediate information was available for Lacamp or Stone.

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