Institutional Investor corridor of famer Rich Bernstein is a market bull whose playbook excludes a few of Wall Street's hottest teams.
He blames a dangerous see-saw dynamic taking part in out within the market.
"On one side, we have all that I would call the bubble assets: tech, innovation disruption, cryptocurrencies," the Richard Bernstein Advisors CEO and CIO instructed CNBC's "Trading Nation" on Friday. "On the other side of this see-saw, you have literally everything else in the world. I think if you're looking at 2022 into 2023, you want to be in the everything else in the world side of that see-saw."
Bernstein believes a shortage of capital will spell alternatives.
"That's where your returns are higher," he mentioned.
His primary choose is vitality, a gaggle he listed as a prime play coming into 2021. Earlier this yr, Bernstein referred to as oil probably the most ignored bull market. And now, he believes it could possibly be the expansion group of 2022.
The Energy Select Sector SPDR Fund, which tracks the group, is already up 51% up to now this yr.
In a particular notice to CNBC, Bernstein wrote "The last time the FCF [free cash flow] yield for the energy sector was this high relative to either the market or the Tech sector was around the Tech Bubble, and energy outperformed for a decade. The sector's dividend yield is >3X the S&P 500's dividend yield."
Bernstein, who ran technique at Merrill Lynch, warns right now's "bubble assets" may dramatically damage buyers identical to the early 2000s.
Stock picks and investing traits from CNBC Pro:
Jim O’Neill, Dan Niles, Guy Spier and seven different market strategists share their finest recommendation for 2022
Stocks head for a uncommon third-straight yr of double-digit returns. What occurs subsequent?
Goldman loves these EV sector shares — and says one may rally 100%
"Valuations are very high and what you have to remember is the valuation is more important than the story," he mentioned.
He acknowledges tales instructed concerning the web and mobile communications through the 2000 tech bubble turned a actuality over the subsequent decade. But it took years to gather the income.
"If you invested in the Nasdaq 100, which were the real companies at the time, it took you 14 years to break even," mentioned Bernstein. "Something tells me that the people today are not paying attention to valuations, but also aren't thinking it's going to take them 14 years to break even."
Crypto as a 'monster' bubble
Bernstein additionally sees cryptocurrency as a serious downside. Last June on "Trading Nation," he warned the push to personal bitcoin and different cryptocurrencies was turning into dangerously parabolic.
"Cryptos are the biggest financial bubble ever in history," mentioned Bernstein. "This is just a monster one."
As of Friday's market shut, bitcoin is off about 30% over the previous month. It's nonetheless up 63% up to now this yr.
Bernstein speculates bitcoin may fall as a lot as 90% identical to some tech shares through the 2000 bubble.
"I think one wants to wait to look at the true fundamentals, and look at the valuations before deciding that this is all over," Bernstein mentioned.
Avoid 'bubble assets' tech and cryptocurrencies: investor Rich BernsteinTrading Nation
based mostly on web site supplies www.cnbc.com