The stock market’s volatility jump may be in its early stages.

Despite a bullish 2022 outlook, Wilmington Trust’s Meghan Shue expects the wild swings to ramp up as investors digest a less accommodative Federal Reserve and assess new risks tied to the Covid omicron variant.

“While we’re overweight to equities, we’re holding elevated cash because we think there are probably going to be more opportunities presenting themselves,” the firm’s head of investment strategy told CNBC’s “Trading Nation” on Friday. “Cash could be your friend over the coming months.”

The major indexes are on a losing streak. The Dow dropped 532 points on Friday and posted its worst day of the month. It fell 1.9% last week while the S&P 500 lost 1%.

Meanwhile, the tech-heavy Nasdaq fell 3% and is now off more than 6% from its 52-week high. The Nasdaq traditionally has a tougher time weathering a rising rate and slowing growth environment.

“When you combine that with elevated valuations and then continued uncertainty around omicron, you just get a recipe for continued volatility and a possible correction,” said Shue, a CNBC contributor.

Her base case calls for stocks to correct as much as 10% over the next two to three months. But she refers to it as a buying opportunity.

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“Cyclicals and value still look very attractive,” she said. “Small caps are also very beaten down. And, if we do move beyond omicron, we could see a rally there.”

Overall, Shue, who oversees $152 billion in assets, is positive on the U.S. and international markets. According to her firm’s bullish 2022 forecast, inflation will normalize, supply chain pressures will ease and labor market participation will pick up.

“We’re going to be moving back into a reacceleration phase of the economic cycle,” she said.

Last month, Shue told “Trading Nation” her firm had its biggest overweight in stocks ever.

“Stocks [are] still expected to be one of the strongest performing asset classes,” Shue said.

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