Amid Market Gains, Two Sectors Could Lag: Pro

With $259 billion in assets under management, where is Jim McCaughan, CEO of Principal Global Investors, putting money to work?

In a live interview on CNBC’s Fast Money Halftime Report, McCaughan tells us he likes stocks such as Caterpillar . “That’s exactly the kind of stock that should continue to do well in this market,” he says. “And I like Boeing as well as other transportation equipment names,” he says.

McCaughan thinks amid better than expected earnings and bullish commentary from central banks – the smart play is long manufacturing and capital goods names.

“We’ve have brave comments from Mario Draghi and the Fed has practically said they will do something if the economy stumbles.”

In other words, he sees central banks indirectly driving the advance.

However, that’s not to say all stocks will benefit equally. He thinks two sectors will underperform.

McCaughan believes consumers will tighten the belt with things like higher prices at the pump and a forthcoming increase in food prices taking a toll.

“An austere consumer isn’t going to get carried away,” McCaughan says. That’s bearish for the consumer discretionary sector and banks . “It’s going to be quite hard for banks to make a lot of money over the next few years.”

“If you think that the economy is turning around, then, at these valuations Caterpillar is extremely attractive,” adds trader Guy Adami. “But that’s only if you think the economy is turning.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long M; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long WFC; Stephanie Link is long EMR; Stephanie Link is long DD; Stephanie Link is long BRCM

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