Despite an impressive run last year, the equities market and stock exchange traded funds will still be investors’ best friend.
“We expect stocks to grind higher, if unevenly, and continue to prefer them to the alternatives,” BlackRock analysts said in a report. “While stocks are no longer cheap, they still look like a more attractive option than cash or bonds.”
The equities market can still find support from low inflation, a low interest rate environment and a gradually improving economy.
Consequently, the BlackRock strategists argue that investors should overweight equities and underweight cash and bonds. So, instead of the traditional 60/40 stock/bond split, investors may start to cut back on their bond weights and begin pushing up their stock allocations.
The world’s largest asset manager argues that investors should pare back some U.S. holdings and find better opportunities in foreign markets, specifically Europe, Japan and developing countries.
“Most U.S. investors are generally underweight international equities,” BlackRock said. “In many cases, we believe it makes sense to consider paring back some U.S. exposure in favor of non-U.S. stocks.”