BlackRock has $US3.8 trillion of assets under management. So, it’s worth keeping an eye on how it advises its clients to invest.
With the S&P 500 trading right near its all-time high today, BlackRock’s Chief Investment Strategist Russ Koesterich thinks investors should look for opportunities elsewhere.
From Koesterich’s weekly commentary:
U.S. Stocks Fully Valued; Consider International
We expect that continued Fed accommodation will help support stocks. However, last week’s rally seemed aggressive for a few reasons: all Congress could fashion was a temporary solution, economic growth remains soft, and the Fed will start to taper at some point in the next six months or so.
Despite all of this, valuations have continued to climb. U.S. stocks are now trading at roughly 2.5x book value, a 15% increase from the end of 2012. In other words, the majority of this year’s gains have come through higher multiples, not a boom in corporate earnings. And while U.S. stocks still look reasonable compared to history, they are looking fully valued relative to an environment of 2% growth. This does not mean the market is due for a correction, but simply that going forward, gains need to be more driven by earnings growth; otherwise, U.S. stocks will start to climb into overvalued territory. In the meantime, we continue to see good bargains outside the United States. Within the U.S., the energy and technology sectors appear to be more reasonably priced.
Koesterich describes the latest fiscal fiasco as a “near-death experience” which “likely slows the economy.”