A chief investment officer says industrial and rail stocks are a good buy if Washington passes a big stimulus bill

• Bryn Mawr's chief investment officer Jeff Mills told CNBC's "Trading Nation" Monday that investing in material, industrial and rail stocks are likely to yield great returns once US lawmakers agree on another set of measures to help the economy.
• He said: "We think industrials will do well in either political environment, that is how I would want to be positioned over the next 12 months."
• Mills said he would still avoid investing in cruise and airline stocks that have been heavily impacted by the pandemic.
• Democrats and Republicans have been gridlocked in a stalemate over fiscal stimulus since July.
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The time may soon be right to buy industrial, materials and rail stocks, all of which have been beaten down by the coronavirus pandemic this year, once US lawmakers reach an agreement on a new round of financial lifelines for the economy, Bryn Mawr's chief investment officer Jeff Mills told CNBC on Monday.

"If you get a big fiscal stimulus, that is probably dollar-negative and materials have the largest foreign revenue exposure of any sector in the S&P 500," Mills told CNBC's "Trading Nation". "What moves materials around the country - that is the rails, so I also think transport also definitely has some room to the upside here."

"We think industrials will do well in either political environment, that is how I would want to be positioned over the next 12 months," he added, referring to either a Democrat, or Republican, win at next month's presidential election.

He said transport firms like FedEx can still gain, even though the company's stock has surged more than 80% since the start of the year, supported by a boom in e-commerce and online shopping.

Mills, who oversees more than $17 billion of assets according to CNBC said: "Be underweight the mega-cap growth trade," he added. "That's overvalued, and you will see valuations come down."

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He thinks it is still too early to invest in some airline and cruise stocks, which have been among the worst-hit by widespread coronavirus lockdowns.

"You probably want to stay away from the other tail, which are airlines, cruise lines [and] energy — the really distressed deep value stuff," Mills said. "Find yourself somewhere in the middle. We like industrials. We like materials."

Shares in cruise operator Carnival and Norwegian Cruise Line Holdings are both down around 70% since the start of the year.

Mills said the broader market environment has once again highlighted whether investors are rotating away from growth and into value.

"Right now, all of that stems from stimulus talks," he said. "You are seeing that rotation from growth into value fade a little bit."

The number of long-term unemployed people is still rising, despite gains in the number of workers on non-farm payrolls in the last few months, Mills said.

"We are seeing cracks in consumer incomes," he said. "The question is do those cracks get filled with additional stimulus? If they do I think the rotation can happen quicker but if they don't then they have to heal on their own and I think you have this default trade back to growth like we are seeing," he added.

Democrats and Republicans have been at loggerheads over the size and reach of another package of measures to support the real economy since July.

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The latest exchange of views between the two sides took place over the weekend, when President Donald Trump's team proposed a $1.8 trillion stimulus package over the weekend.

The measures would include a $400 boost in weekly unemployment insurance, $1,200 stimulus checks for US adults, and $1,000 checks for every child. House Speaker Nancy Pelosi rejected the plan, calling it "grossly inadequate."