Beyond value, we believe cyclical stocks like energy should benefit the most from an improving global economy. In addition, the global sector provides a healthy dividend of around 3% as measured by the iShares Global Energy fund (IXC) based off of the S&P Global Energy Index
Finally, while I don’t expect any inflation this year or probably next, should prices ever start to accelerate, energy stocks have historically provided a good hedge against inflation and a loss in purchasing power.
Sources: Bloomberg, BlackRock research
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Funds that concentrate investments in a single sector will be more susceptible to factors affecting that sector and more volatile than funds that invest in many different sectors.