The U.S. stock market is having a tough time amid trade-war fears. Investors should stick with equities over the long term but those looking for a near-term buffer should go for gold instead of Treasury bonds, according to BlackRock.
“We stay overweight U.S. stocks as policy uncertainty should ease over a six- to 12-month horizon. We don’t see long-term bonds as reliable portfolio diversifiers, even if growth suffers, given persistent deficits and inflation,” wrote Jean Boivin, head of the BlackRock Investment Institute, in a research note.
Mostly, the counsel is against panic. Despite the S&P 500’s fall into correction territory, BlackRock notes earnings are expected to grow 12% this year, barely down from 14% last September. Meanwhile in the hard-hit technology sector, margins, earnings and revenue forecasts are holding up and free cash flow is at 30% of sales, the highest share since 1990.
However, for those inclined to chase safety, BlackRock suggests gold could be a better source of portfolio diversification than Treasuries, with bond yields potentially climbing as investors demand more compensation for the risk of holding long-term bonds. Bond prices and yields move inversely.
Gold was up 0.9% to $3,031.70 an ounce early on Tuesday.
Shared by Golden State Mint on GoldenStateMint.com
