The stock market's honeymoon with President Donald Trump may be over, said BMO Capital Markets, suggesting that a good bet to ride out any volatility may be growth stocks.
"We believe one strategy that works quite well in this sort of environment is a portfolio barbell where investors balance aggressive and defensive positioning," Brian Belski, chief investment strategist at BMO Capital, said in a note Thursday.
He recommended stocks that show "growth at a reasonable price, or GARP" and that have the potential for long-term growth in their dividend yield, in order to outperform the S&P 500.
"We have maintained a dividend preference for quite some time. We have found that not only do these stocks help to guard against periods of market volatility, but they also tend to perform extremely well over longer time frames," Belski said.
He also cautioned investors to not focus single-mindedly on currently high dividends but to keep in mind the long game.
"Besides, high dividend yields by themselves are sometimes a sign of impending trouble (e.g., dividend cuts)," he added.
S&P 500 6-month performance