BlackRock’s Chief Investment Strategist Russ Koesterich sees opportunities in technology and energy sectors.
In last week’s commentary, BlackRock highlighted the dangers in defensive, yield-producing stocks, such as utilities and real estate investment trusts (REITs), which we believe are vulnerable to even a modest rise in U.S. interest rates.
“Indeed, last week the Philadelphia Utility Index was down another 3.5% and investors are starting to rotate into more cyclical parts of the market, a trend we would endorse”, says Koesterich.
According to Koesterich, one area where BlackRock sees opportunity is technology.
“Last week, Cisco posted strong earnings and a 7% jump in revenue, and Apple became the first company to reach a milestone $700 billion market capitalization. For the week, the U.S. technology sector was up over 4%. The recent strength in technology has helped push the Nasdaq Composite Index to its highest level since early 2000”, Managing Director says.
Another sector worth considering is energy, specifically the large integrated oil companies, which BlackRock believes will be the beneficiary of the marginally improved global economic outlook.
According to Koesterich, the catalysts is a further drop in the U.S. oil rig count, which indicates supplies may tighten and push prices higher, as well as the GDP acceleration in Europe.
“We believe this signals some stabilization in the global economy and, by extension, demand for oil. With the recent surge in oil prices benefiting large, global companies, the S&P Global Energy Index is up roughly 13% from its recent lows and is now positive year-to-date. We continue to see value in this segment of the market”, Koesterich says.