Stocks are poised to see a correction of up to 10% that zaps euphoria from market, SkyBridge Capital co-CIO says

• Troy Gayeski, SkyBridge Capital co-chief investment officer, told Fox Business that the market is poised for a correction in the 5-10% range.
• He said this correction could be expected because there's a "flat money supply" and an S&P 500 that's trading at 20 times earnings.
• The co-chief said investors who need to go long should have a combination of large-cap tech stocks, large bank stocks, and gold in their portfolios.
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SkyBridge Capital's Troy Gayeski told Fox Business on Monday that the market could be due for a correction of up to 10%.

The co-chief investment officer said that a "flat money supply" following the Fed's balance sheet contraction, with an S&P 500 that's trading at 20 times earnings, could lead to this correction.

"It's not that we're going to have a pullback anything like March, but we're really poised to have a nice correction somewhere in the 5-10% range that takes a lot of the euphoria out of the market," Gayeski said.

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He explained that the Fed's balance sheet expansion led to massive money supply growth that flowed into financial assets and the housing market, but that balance sheet has now contracted. "What people forget is the balance sheet has stopped expanding here in the last 12 weeks, it's actually contracted in the last six to eight," he said.

Amid this expectation of a correction, Gayeski is recommending investors who need to go long have a combination of large-cap tech stocks, bank stocks, and gold.

"There's no reason to puke large cap tech but like we said be very cautious now. And at this stage of the game with money supply still at high levels and probably going higher, it doesn't hurt to own some gold," Gayeski added.

He also said that bank stocks could retake leadership if there's a rapid economic recovery, but he's not expecting a very quick recovery.