Since 2000, the labor force has been incrementally decreasing from a peak of 67% to 63.6%, around a 31-year low, which is partly due to the retiring workforce from the Baby Boom generation.
Consequently, the iShares analyst suggests investors should construct portfolios with a prolonged period of slow growth in mind.
“In particular, we see good opportunities in U.S. mega capitalization stocks (mega caps), which remain cheap and are levered to international growth opportunities,” Koesterich said in the note. “Conversely, investors should treat small capitalization stocks (small caps) cautiously and avoid overpaying for this style.”
Some mega-cap ETFs include:
- SPDR Dow Jones Industrial Average (NYSEArca: DIA)
- iShares S&P 100 Index Fund (NYSEArca: OEF)
- Guggenheim Russell Top 50 ETF (NYSEArca: XLG)
- Vanguard Mega Cap 300 ETF (NYSEArca: MGC)
Investors who want to take an aggressive stance against small-cap stocks can hedge with inverse small-cap ETFs:
For more information on the broader markets, visit our S&P 500 category.
Max Chen contributed to this article.