Don’t quit stocks now, says world’s top fund manager

Another mega-day of earnings is already underway, with Microsoft and Alphabet arriving later, as the Federal Reserve kicks off its two-day policy meeting. So another day, another record for Wall Street? Stock futures are yet to commit, and investors may be beginning to wonder if a peak time is approaching.

Stock valuations are high right now, and a lot of good news comes at a price,” Jeffrey Buchbinder, equity strategist at LPL Financial, tells clients in a note. “However, we think the valuations are quite reasonable considering low interest rates and we expect inflation to remain largely contained.” That view coincides with our call for the day from a BlackRock strategist team led by Jean Boivin, director of the Asset Manager’s Investment Institute. The world’s largest fund manager had $ 9 trillion in assets under management in the first quarter, so his overview of what’s going on is generally worth listening to. What is the end result of BlackRock? Stay bullish on equities, neutral on credit, and underweight on government bonds. “The ever-wide restart, coupled with our belief that this will not translate into significantly higher rates, supports our pro-risk stance,” say Boivin and the team. That is not to say that strategists do not see risks on the horizon, such as a “market overreaction to exceptional growth data” in the coming months, with bouts of volatility as the Fed tries to stay “behind the curve” of inflation. . In particular, Boivin and the team see a tougher path for emerging market assets, but say now is not the time to abandon stocks. BlackRock acknowledges that investors are in new territory right now, dealing with a one-time restart of US growth fueled by the COVID-19 pandemic that may still be underestimated by many. And that’s in contrast to the continuing disappointments in growth after the 2008 financial crisis. But he says investors shouldn’t worry because as US growth begins to peak during the summer, the rest of the world will start to jump. catch up, helped by vaccine launches.

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The other dynamic that bothers investors right now is the “high bar” the Fed has set to keep its easy money policy in place, which again has not been fully assimilated, says BlackRock. “We see that markets are still underestimating the Fed’s potential to achieve inflation above target in the medium term, as it seeks to compensate for persistent failures in the past. That is why we believe that the direction of displacement of returns is greater. But we believe that the overall tuning will be much quieter than we would expect in the past based on growth dynamics, and there have already been a lot of tweaks, ”say Boivin and the team. As yields on 10-year Treasuries BX: TMUBMUSD10Y have more than tripled from last year, BlackRock is cutting a tactical underweight in Treasuries and closing an overweight in Treasury Protected Securities (TIPS) . Its pro-cyclical stance on equities means overweights in emerging markets and US small-cap stocks. Chart of the Day COVID-19 variants were the top risk for investors cited in Deutsche Bank’s April investor survey:

Tesla falls and gains abound YM00 stock futures, + 0.04% ES00, + 0.08% NQ00, + 0.11% are flat after a record session, while European stocks SXXP, -0.16% are falling. The DXY dollar, + 0.07% has risen and bitcoin BTCUSD, + 3.00% has risen above $ 54,000. Speaking of bitcoin, Tesla TSLA, + 1.21% reported a seventh quarter of gains, driven in part by the sales of some of its cryptocurrency holdings, although there could be cautious regulatory scrutiny ahead. The shares are falling due to disappointing earnings and production problems. Shares of package sender UPS UPS, -1.76% and toymaker Hasbro HAS, -0.13% are rising with the results, while those of conglomerate GE GE, + 0.15% are falling as that income fell short. Shares in Eli Lilly LLY, -0.79% is slipping on disappointing earnings from the pharmaceutical company. After the shutdown, tech giants Microsoft MSFT, + 0.15% and Alphabet GOOGL, + 0.43%, chipmaker Texas Instruments TXN, + 1.35%, and coffee king Starbucks SBUX, -1.40% are among the hottest aspects. featured. After a sudden surge on Monday thanks to a big boost from individual investors, video game retailer GameStop GME’s shares, + 11.74%, have risen again on news of a successful $ 551 million share offering. The Case-Shiller Home Price Index and the University of Michigan Consumer Confidence Index are ahead as the two-day meeting of the Federal Reserve begins. President Joe Biden is expected to mandate a minimum wage of $ 15 per hour for all federal contractors. Read: Why a Fed Focus on Those Most Affected by the Pandemic Matters Randomly read Where are the beef recipes? Everything changes on the Epicurious recipe site. It is time for the pink Supermoon. Need to Know starts early and updates until the opening bell, but sign up here to receive it once in your email box. The emailed version will ship at approximately 7:30 AM ET. Do you want more for the next day? Sign up for The Barron’s Daily, a morning investor briefing, featuring exclusive commentary from the Barron’s and MarketWatch writers.