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Tech vs Industrials? Two Stock/Sector Strategies

Stocks struggled on Wednesday after tepid reports on employment and the services sector. How can investors profit in this volatile environment? Robert Doll, vice chairman and global CIO of equities at BlackRock, and Barry Knapp, head of U.S. portfolio strategy at Barclays, shared their market outlooks.

“Market will go through a period of consolidation of lower lows and lower highs and it will look much like the first half of 2004,” Knapp told CNBC.

He said he is cautious on the markets in the first half of the year, and more optimistic towards the second half.

The industrial sector is just seeing signs of a recovery and it’s a good place for investors at the moment, suggested Knapp.

Technology, on the other hand, which is overowned and overloved, the second derivative of forward earnings estimates is not moving higher,” he warned.

“So there are still a couple cyclical sectors we like, but during the period of consolidation, or adjustment to policy normalization, defensives should outperform.”

In the long run, however, Knapp said the cyclicals are going to dominate.

'Overloved' Tech? Doll's View

In the meantime, Doll said we are in a cyclical economic recovery.

“I agree that [tech stocks] are overloved at the moment, but as long as those earnings keep coming through, the stocks eventually will do better,” he said.

“You can’t help being impressed by the product cycle from companies like Microsoft or Apple.”

“And our guess is that after this pause, these stocks will come back again,” he added.

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CNBC's Industrials in the News:

United Technologies

General Electric*

3M

*General Electric is the parent company of CNBC.

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Disclosures:

No immediate information was available for Doll or Knapp.

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Disclaimer