Shopper staples and IT shares are "tremendously costly" in keeping with the strategist


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According to Paul Gambles, executive director of MBMG Group, investors should avoid "scary-priced" equity sectors like IT and consumer staples.

Gambles spoke to CNBC's "Squawk Box Europe" on Friday about such sectors being "tremendously expensive".

"There is such a tight operating window that these stocks can continue to rise from their current location," said Gambles.

Non-essential IT and non-basic consumer goods have grown significantly since the coronavirus outbreak. More people work remotely and generally spend more time at home due to lockdown restrictions.

The MSCI World Consumer Discretionary Price Index is up 85% since mid-March, while the MSCI World Information Technology Price Index is up over 75%.

Gambles said many of these types of stocks have benefited from the shift to digital and e-commerce amid the coronavirus pandemic. However, if the lockdown restrictions persist in the coming months, MBMG did not see this trend long.

His comments come as world stocks float near record highs and demand for riskier assets is fueled by the anticipated introduction of Covid-19 vaccines.

It is hoped that a safe and effective vaccine can help end the coronavirus pandemic that has claimed over 1.5 million lives around the world and hit the global economy hard.

"High dividend, low volatility"

Gambles said it was worrying to see that some investments are now being "rated for absolute perfection" and that they continue to get more expensive in news like the announcement of effective coronavirus vaccines.

He said it was difficult to see how this trend could continue, warning that there are "major downsides to when things are not as absolutely perfect, as absolutely goldilocks as the price of momentum stocks implies".

Momentum stocks are companies like technology companies that have consistently generated high returns over an extended period of time. Gambles noted that momentum stocks in the S&P 500 had risen 28% so far this year, while "high dividend, low volatility" companies had fallen year-to-date.

Examples of these high dividend, low volatility stocks include those in utilities, real estate, and consumer staples.

Gambles believed it was more about looking for investments that offer good value "rather than making an outright call that something is going to happen in 2021 – we don't know."

In MBMG's December investment outlook, the company said it was bullish on gold, gold miners, long-term US government bonds and the US dollar.


Katherine Clark