Other commodities have suffered as well: Most agricultural commodities are down between 5% and 10% year-to-date, and oil prices have slid on less angst over Iraq and the Middle East. Among these various commodities, I remain particularly cautious of precious metals given their sensitivity to higher real rates.
As for which asset classes I like, I continue to prefer stocks over the “traditional “safe-haven” assets I mention above. Why? Traditional “safe haven” assets such as short- to intermediate-duration U.S. Treasuries and gold may, in fact, be more vulnerable than stocks in the near term as a period of interest rate normalization approaches. Although not cheap, stocks have the tailwinds of still-low rates and improving economic conditions at their back.
The stock market continues to wrestle with a series of counterforces, and for now, low rates and an improving U.S. economy are trumping full valuations and lingering geopolitical risks, allowing stocks to move higher.
Sources: BlackRock, Bloomberg
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.