Equity market leadership is expected to come from utilities, staples and telecom stocks in the coming months as the cyclical recovery gets long in the tooth and investors search for safer gains among the defensive sectors of the economy, says Jack Ablin, U.S. portfolio strategist and chief investment officer with Harris Private Bank.
“We remain bearish on the broad equity market for the next 4-6 quarters, so it makes sense that we are seeking to rotate into the stodgy corners of the market,” he said in a note to clients this week.
While the relief rally in stocks over the past few trading days may continue over the very short term, Mr. Ablin believes the combination of a creaking U.S. economy and record low Treasury yields forces investors to focus more squarely on defensive names that offer a greater degree of safety than other equities and more attractive yields than bonds.
“We would use any rally into the first few weeks in September as an opportunity to rotate sector allocations into conservatively positioned utilities and telecom,” he wrote.
