Principal Asset's chief global strategist says now is a good time to sell all shares

Sell? Yes, it may actually make sense to some people at this point. The stock is overpriced at the moment, according to Principal Asset's chief strategist, and it wouldn't be so bad for investors to take profits.

Seema Shah

Seema Shah is Principal Asset Management's chief global strategist, who recently spoke about the so-called ''new era of investing''.

With the Fed committing to tighter monetary policy after a decade of near-zero interest rates, a new era of investing is beginning and investors will need to adopt a different strategy for 2023 and beyond, says Seema Shah.

"It's a very different era from what we've seen before, and making such high returns will be much harder," Shah said. "Investors can't just go back to the stocks they've become accustomed to over the last 10 years."

Better positioning starts with reducing downside risk, she explained, and much of that can be traced to the stock market, which has been one of the biggest beneficiaries of the easy money era.

For Shah, stocks will be one of the key losers, but the current stock rally represents a good time to rake in profits and exit positions before other headwinds hit, such as an earnings recession and a broader economic downturn.

Diversifying for a new era with alternative assets

Looking ahead, Shah recommends bonds and the fixed income space as safe corners of the market, given that yields are generating attractive returns compared to recent history.

But Snah is not merely pessimistic; she is happy to return to equities once it is ''over''. And while Shah is not looking for specific stock names this year, she likes the health care, energy and utilities sectors.

She expects inflation to slow further this year, but doesn't expect it to fall to the Fed's 2% target until next year. High prices point to the need for inflation-mitigating positions such as listed infrastructure, Shah said, referring to companies with long-term assets that provide essential services.

Historically, in periods of low economic growth and high inflation, listed infrastructure outperforms fixed income and equities, she said.

Meanwhile, Shah also likes commodities, which she also mentions in the context of the new era because they are less susceptible to inflation fluctuations.

"There will always be volatility in commodities. But if you look at the longer term horizon, the commodity picture is strong simply because they are finite resources," she said.

Short-term investments in Chinese markets

Her investment firm is positive on Chinese equities over the next six months because of China's reopening and the easing of pent-up demand.

But the firm's optimism is waning after this year due to geopolitical tensions and political uncertainty.

"Geopolitics usually moves slowly and the U.S. and China are probably locked in for a long time," Shah said. "This will limit growth on both sides, for both the US and China. I think geopolitical pressures will impact China's stock market growth, its earnings, the strength of its companies. That's more of a question for 2024 and beyond."

• What do you think?

Please note that this is not financial advice.