The US equity rally is not set to end any time soon despite current market fears, according to BlackRock investment strategists Richard Turnill and Kate Moore.
Speaking at BlackRock’s mid-year investment outlook conference in New York on Tuesday, Turnill said:
‘Many investors are worried because we are in the eighth year of the economic expansion. Many investors think that we are due for a recession. Cycles don’t die of old age, they die because imbalances build up.’
He believes this sustained expansion is broadly constructive for equities and that aspects of the market which have been doing well can continue on their current path.
Kate Moore, chief equity strategist at BlackRock, shared his view, stating the strength of the US market is set to persist.
‘There is a fear about market vulnerability, that the asset class doesn’t have the strength to continue even if we have a sustained modest growth environment ahead, but we disagree.
‘We don’t see the equity market as actually being vulnerable at this point.’
She highlighted that the equity market will remain strong because, for the first time in a number of years, fundamentals look good and earnings are strong.
According to Moore, the earnings recovery will continue and the worst, in terms of earning, is behind us and company profitability could continue for multiple quarters or years.
‘When we think about this fear that markets are fragile, a lot of this concern seems to stem around the extremely strong performance of one sector, technology.’
Things has moved on since the dot-com crash, she added, with stronger leadership in charge and the sector is showing solid earnings on a global basis.
The strategists said that BlackRock is currently overweight technology due to its strong fundamentals, however, overcrowding in this space could pose some risk if investors look to rotate into other trades.
Another sector Moore said they are positive on is financials.
‘We see macro, fundamental and valuation arguments for the sector and continue to call it as a high conviction trade.’