After July’s spectacular rally, US stocks SPX,
have been caught in a tight trading range over the past two weeks as investors struggle to make sense of some of the most confusing economic data in recent years.
But while the S&P 500 Index held above the key 4,000 level thanks in large part to a rebound in hard-hit megacap tech stocks like Meta Platforms META and Amazon.com Inc. AMZN, a team of Analysts at BlackRock, the world’s largest asset manager, believe investors would be better served by a less attractive, defensively positioned portfolio of “low volatility” stocks and bonds.
This view is based on the idea that hopes for a “Fed pivot”, involving the Federal Reserve backing away from its plans for further interest rate hikes, are misplaced, as signs of deteriorating business performance and that inflation is the service sector. is shaping up to be much stiffer than investors currently expect.
According to BlackRock Gargi Chaudhuri, head of iShares Americas investment strategy, said the asset management giant’s internal metrics send mixed signals about the state of the US consumer and business sector.
But once the market realizes that the Fed’s pivot is still a long way off, stocks could risk reversing all or part of the growth-led rally that saw the Nasdaq Composite COMP,
and the Russell 1000 Growth Index outperform RLG,
the Dow Jones Industrial Average DJIA,
and S&P 500 over the past month. While the soaring cost of energy and other goods has captured the spotlight this year, Chaudhuri worries that inflation in services, like the rising cost of housing, is blinding the market by being much stickier than it looks. investors and economists currently predict this.
If that happened, investors would be better off focusing their portfolios on “defensive” stocks, including high-quality corporate bonds and low-volatility stocks. Defensive portfolios outperformed in the first six months of 2022, even as stocks and bonds sold in tandem, resulting in one of the worst first halves for the markets in decades.
See: Goldman Sachs Says It’s Too Early For Markets To Trade ‘A Full Fed Pivot’
Some ETFs recommended by Chaudhuri include: iShares MSCI USA Min Vol Factor USMV ETF,
the iShares iBoxx $ Investment Grade Corporate Bond ETF LQD,
the iShares US Healthcare Providers IHF ETF,
and the iShares 1-5 Year Investment Grade Corporate Bond ETF IGSB,
BlackRock’s concerns could already surface on Tuesday, as the tech-heavy Nasdaq Composite led markets lower, driven by falling semiconductor stocks like Nvidia NVDA,
and Micron Technology Inc. MU,
The Nasdaq fell 1.4%, while the S&P 500 fell just 0.6% in comparison.
After July’s spectacular rally, US stocks SPX,
have been caught in a tight trading range over the past two weeks as investors struggle to make sense of some of the most confusing economic data in recent years.
But while the S&P 500 Index held above the key 4,000 level thanks in large part to a rebound in hard-hit megacap tech stocks like Meta Platforms META and Amazon.com Inc. AMZN, a team of Analysts at BlackRock, the world’s largest asset manager, believe investors would be better served by a less attractive, defensively positioned portfolio of “low volatility” stocks and bonds.
This view is based on the idea that hopes for a “Fed pivot”, involving the Federal Reserve backing away from its plans for further interest rate hikes, are misplaced, as signs of deteriorating business performance and that inflation is the service sector. is shaping up to be much stiffer than investors currently expect.
According to BlackRock Gargi Chaudhuri, head of iShares Americas investment strategy, said the asset management giant’s internal metrics send mixed signals about the state of the US consumer and business sector.
But once the market realizes that the Fed’s pivot is still a long way off, stocks could risk reversing all or part of the growth-led rally that saw the Nasdaq Composite COMP,
and the Russell 1000 Growth Index outperform RLG,
the Dow Jones Industrial Average DJIA,
and S&P 500 over the past month. While the soaring cost of energy and other goods has captured the spotlight this year, Chaudhuri worries that inflation in services, like the rising cost of housing, is blinding the market by being much stickier than it looks. investors and economists currently predict this.
If that happened, investors would be better off focusing their portfolios on “defensive” stocks, including high-quality corporate bonds and low-volatility stocks. Defensive portfolios outperformed in the first six months of 2022, even as stocks and bonds sold in tandem, resulting in one of the worst first halves for the markets in decades.
See: Goldman Sachs Says It’s Too Early For Markets To Trade ‘A Full Fed Pivot’
Some ETFs recommended by Chaudhuri include: iShares MSCI USA Min Vol Factor USMV ETF,
the iShares iBoxx $ Investment Grade Corporate Bond ETF LQD,
the iShares US Healthcare Providers IHF ETF,
and the iShares 1-5 Year Investment Grade Corporate Bond ETF IGSB,
BlackRock’s concerns could already surface on Tuesday, as the tech-heavy Nasdaq Composite led markets lower, driven by falling semiconductor stocks like Nvidia NVDA,
and Micron Technology Inc. MU,
The Nasdaq fell 1.4%, while the S&P 500 fell just 0.6% in comparison.