Maintain exposure to global equities. In my opinion, the recent sell-off is a mid-cycle correction rather than the start of a bear market and, as such, I’d maintain exposure to global equity markets. If anything, the recent drop in interest rates, coupled with the decline in stock valuations, provides an even more compelling case for the asset class as offering better long-term return prospects than bonds.
Favor large- and mega-cap stocks. These market segments have held up better than their small- and mid-cap counterparts in the last few weeks, providing a bit of cushion from the volatility. And with the recent sell-off having made them more attractively valued, I suggest investors continue to emphasize larger capitalizations, particularly with more volatility likely on the horizon.
Sources: BlackRock research, 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.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.