But despite the selling, I still believe that stocks offer better value than bonds. Within the equity market, however, I continue to advocate embracing some of last year’s losers and adopting a general bias toward value-oriented areas of the market, like large and mega cap names.
That said, as more investors move into relatively safer areas of the stock market, some of the defensive sectors, including health care, consumer staples and utilities, are starting to look richly valued. In particular, I’d suggest trimming positions in U.S. utilities stocks, which look expensive and are vulnerable to the gradual rise in interest rates that I expect to happen over the second half of this year.
Sources: Bloomberg, BlackRock research, Citi 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.