BlackRock strategists upgraded U.S. equities, expecting an accelerated economic restart in 2021.
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Positive vaccine developments are giving stocks a shot in the arm for the third straight Monday.
This time it’s the AstraZeneca
AZN,
and University of Oxford vaccine candidate, which has been found to be up to 90% effective in preventing COVID-19 infections, according to data from late-stage trials. The vaccine was 70% effective overall but 90% effective when people were given a half dose first and then a full dose, as opposed to two full doses, the university said.
With a lower efficacy rate than Pfizer
PFE,
and Moderna’s
MRNA,
rival efforts, the British drugmaker’s shares fell on Monday. But the experimental vaccine’s more convenient temperature storage requirements and mass manufacturing in multiple countries produced widespread positive sentiment across markets.
Read: Pfizer’s COVID-19 vaccine 95% effective in final results
The shortened Thanksgiving holiday week looks to be off to a good start, but investors will be closely watching a flurry of U.S. economic data on Wednesday, as well as the surging COVID-19 cases.
In our call of the day, BlackRock upgraded U.S. equities to overweight but called for a “nuanced approach,” given the tough winter ahead before vaccine deployment potentially rides to the rescue in 2021.
The fund manager’s strategists recommended a ‘barbell’ strategy, favoring quality large-cap stocks riding structural growth trends, such as technological dominance and sustainable assets, as well as smaller companies geared to a potential cyclical upswing.
The challenging months ahead in the U.S. and Europe supported the case for large-cap tech and health-care companies to further outperform, they said. However, prospects for an accelerated economic restart in 2021 — amid positive vaccine developments — favored more cyclical exposures, the strategists added.
“Should investors stick to quality — a perennial recent winner — or rotate into beaten down cyclical exposures?” asked BlackRock global chief investment strategist Mike Pyle.
“We believe this is not an ‘either/or’ question — and advocate a more nuanced approach…quality companies that should outperform even if fiscal support disappoints; and selected cyclical exposures that are likely to thrive as the timeline for widespread vaccine deployment advances,” he added.
This balanced approach would give investors greater portfolio resilience, the strategists said, as uncertainty around vaccine deployment and further pandemic relief remains high. The upgrade to U.S. equities and its higher share of quality companies was how the strategists opted to gain exposure to structural growth, they noted.
BlackRock strategists were more selective when it comes to cyclical exposures, tilting toward mid and small-cap U.S. companies, emerging market equities and Asian ex-Japan stocks….
Read More News: BlackRock upgrades U.S. stocks but calls for investors to adopt this ‘nuanced’
