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Stocks Are Cheap, Buy Cyclicals: Blackrock

Global equity valuations are very attractive compared with government bonds stocks and are currently relatively cheap, Stuart Reeve, Portfolio Manager at Blackrock Equities told CNBC.

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“Equity market valuations are really quite attractive, particularly when comparing them to government bonds and other fixed income instruments,” Reeve said. And, despite the recent rally “equities are historically inexpensive, as spreads remain quite compressed.”

So far this year, the FTSE 100 has risen more than 5 percent, France’s CAC 40 is up more than 10 percent, and Germany’s Xetra DAX is the clear outperformer, up more than 20 percent.

Reeve urges investors to look specifically at cyclical stocks, to benefit from what he says is a good recovery in equity markets.

Although projections for the upcoming earnings season have softened, Blackrock says “earnings forecasts are set to rise from here.”

Thomson Reuters now forecasts earnings growth for S&P 500index index companies of 2.8 percent for the first quarter, down sharply from the 10.2 percent outlined in October.

For a more diverse portfolio, Reeve outlined five practical actions.

He said investors should rethink the cost of cash, look for income in different places, be open to alternative asset classes, use exchange traded funds (ETFs)as a precise, low-cost way to tap return, and finally, think long-term by investing well beyond the day you retire.

Reeve favored action two, saying: “Investors have to look for income that can beat inflation , and consider new opportunities in familiar places.”

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Disclosures:

Disclosure information was not available for Steve Reeve or Blackrock.

Disclaimer

Correction: An earlier version of this story incorrectly identified Blackrock Equities' Portfolio Manager as Steve Reeve. His name is Stuart Reeve.

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