4.) Expect continued pressure on other rate-sensitive dividend plays, notably REITs. Despite recent underperformance, US REITS still look expensive by most measures.
5.) Consider overweighting cyclical sectors such as technology and energy. These sectors are likely to benefit from investors’ continued rotation out of defensive sectors such as utilities and are accessible through funds such as the iShares Dow Jones U.S. Technology Sector Index Fund (IYW) and the iShares Dow Jones U.S. Energy Sector Index Fund (IYE).
6.) Consider trimming gold holdings. While I still advocate that investors should maintain a strategic position in gold, rising real interest rates will continue to put pressure on gold. This is why gold prices dropped sharply on Friday after the jobs report.
All of this, of course, is what I’ve been advocating a lot lately. To paraphrase Macbeth, for all the “sound and fury” proceeding last Friday’s non-farm payroll number, it signified “nothing” much new, even though this was enough to spark a Goldilocks rally.
Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.