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Investors should sell stocks now as the risk of new lockdowns in the US is highly likely and could spark a market panic, Guggenheim's Minerd says

Markets Insider
Markets Insider
 2021-07-30

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  • The rising threat of COVID-19's delta variant means now might be a good time, says Guggenheim's Scott Minerd.

  • The Guggenheim Global CIO in his investor letter cited the market's extremely high valuation as a reason to de-risk.
  • He also told CNBC Friday that new US lockdowns are "highly likely."
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell .

The rising threat of COVID-19's delta variant means now might be a good time for investors to take profits and sell, according to Guggenheim's Scott Minerd.

In a Friday note , the global chief investment officer said the spread of the variant, slowing of economic growth, and the extreme level of market valuations are "red flags" that suggest investors should consider de-risking.

"All in all, as far as markets and the economy are concerned, 'Things couldn't be better."'If that's the case, I guess it's probably time to sell!" the CIO said.

After publication of his note, he told CNBC that given the transmission rate of the Delta variant, the US could be back to peak levels of cases within two to three weeks, and its "highly likely" the US will impose lockdowns again. Those lockdowns could damage investor sentiment, he added.

Minerd also noted that the same "cognitive dissonance" that existed in the markets in February 2020 is present today. Similar to then, red flags are popping up everywhere about the dangers of COVID-19, yet the S&P 500 continues to reach new highs.

"I could be wrong about the outcome, but if people start to move beyond cognitive dissonance and transition to panic or even simply risk reduction, at current extreme valuations risk assets are in trouble," he warned.

Minerd added that even if Delta's spread is not as severe as last year's virus, investors can still expect significant volatility in the weeks and months ahead as the market prices in a rising level of uncertainty. He told CNBC the market could see a "severe correction" later this summer.

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