Gabriela Santos warns the market's most popular trades may soon burn investors.
According to the J.P. Morgan Asset Management global market strategist, economic growth is in a "global funk," and it will likely tear into cyclical groups, including technology.
As an alternative, she's encouraging investors to consider a couple of the year's laggards for upside — even if gains are muted.
That distinction belongs to big tech stocks. The tech-heavy Nasdaq 100 has soared 74% over the past three years. But she suggests the rally is winding down, and it's time to take some profits.
"It's a very crowded positioning in a lot of our clients' portfolios. It's done so well for so many years," Santos said. "There is a heavy skew these days in growth and tech specifically."
She says earnings season, which starts next Tuesday, should give investors a sense of the damage from the growth slowdown.
In the meantime, she's focusing on income and dividends.
"The approach then is to not to rely so much on stock prices moving too much higher," Santos said. "There's a good middle ground there in cyclical value. Sectors that are not purely defensive, but do give us more and more of a really good income stream."