‘This market is pricing in perfection,' warns Verdence Capital CIO as tariff deadline looms
Megan Horneman, who oversees $4.1 billion in assets under management, thinks there's too much complacency around the Aug. 1 U.S. trade deadline.
"This market is pricing in the perfect situation," she told CNBC's "Fast Money" on Monday.
In addition to tariff concerns, she lists uncertainty regarding Federal Reserve policy and overbought conditions from a technical perspective as potential issues.
"Once we see that [rate cuts] might be priced off the table, coinciding with the fact that we're not quite sure what's going to happen with the tariff perspective, I think you can see a bit of a valuation correction," said Horneman, who's a former Deutsche Bank senior investment strategist.
Horneman is particularly concerned that technical levels are signaling overbought conditions in growth stocks — including Big Tech.
"These are things that we think might upset the rally that we're seeing here," she said.
Despite her short-term caution, Horneman considers herself a long-term bull and views pullbacks as opportunities. She lists international stocks among her top plays on market weakness.
"I'd warn that right now, they're expensive from a valuation perspective [but] cheap compared to the U.S.," she said. "They've been underloved for way too long, and I think you're seeing some of that rotation just begin. I think that can continue."
To navigate the uncertainty, her key advice to investors right now: Make sure you're allocated appropriately.
"Fast Money" trader Guy Adami also sees concerns, citing the number of retail investors driving recent market gains."Just in terms of valuation, things have gotten a tad frothy here," he said on Monday's show.
The S&P 500 closed at record highs every day last week. As of Friday's close, the index is 16% over the past three months while the tech-heavy Nasdaq is up 21% over the same period. The Nasdaq is also atDisclaimer
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