Reliable blue chip stocks will regain momentum towards the end of the year, boosted by the U.S. economy and developing markets, strategists told CNBC.
Blue chips - large, well-known and trusted companies – will perform better as the U.S. economy gradually recovers and developing markets move away from inflation to growth, Mike Lenhoff, chief strategist at Brewin Dolphin, told CNBC Thursday.
“There has been a slight loss of momentum, but I don’t think they have run entirely out of puff,” he said.
“The refocusing in the developing world away from inflation to growth, and better U.S. performance, suggests to me that by the end of this year we are going to see the resumption of momentum.”
Corporate earnings could hit new all-time highs off the back of the recovery, he believes.
The signs that theU.S. economy is recovering have been mixed so far, leading some experts to caution that it is still at risk of another downturn.
Companies are likely to see costs rise as wage expectations and energy costs go up along with confidence, Andrew Milligan, head of global srategy, Standard Life Investments, told CNBC.
However, rising employment should help boost confidence and subsequently earnings, he added.
Rising US employment has come along with reduced cost of labor in the country, with industries such as the auto industry taking hefty across-the-board pay cuts.
“We are seeing unit labor costs shifting up now,” Lenhoff said.
“We are going to see a transfer of the recovery onto the personal sector, and will move from nothing but bottom line growth to a bit more top line growth and margin squeezes. The top line growth will come from more confidence and spending.”