BlackRock: Investments to Consider When Leaving The Sidelines

“Is now a good time to come off the stock market sidelines?” I’m getting that question a lot lately considering that the market is clearly much more expensive than it was a year ago and that many investors are still sitting on the sidelines in cash.

In fact, according to BlackRock’s recent Investor Pulse survey of 400 Americans, U.S. investors continue to hold a sizable percentage of their assets in low- or no-return cash investments.

While I wouldn’t say now is a bad time to enter the stock market and I don’t believe equities are in a bubble, I would be a little bit opportunistic when entering the market today.

Stocks are still reasonably valued and cheap compared to the bonds; but there are parts of the market that look a bit more stretched. As I mentioned this week in a BlackRock video, there are two equity segments where I would be comfortable putting money to work now:

1.)    Cyclical sectors like technology. While the tech sector’s growth is much slower than in the past, I see value, if not excitement, in the sector. Tech stocks are reasonably priced and typically carry little debt, making the sector less vulnerable to rising interest rates than its counterparts. And within the sector, I especially like larger firms, part of my general preference for large and mega-cap stocks.

2.)    International equities. Generally, stocks in most overseas markets look much cheaper than U.S. equities.

At the same time, I would be more nervous about putting new money to work in these three segments: