Rising COVID-19 cases in the U.S. and Europe point to a subdued start to the day for markets on Tuesday, after Monday’s selloff.
The threat of a second wave continues to dominate the headlines, with new lockdown measures coming into force in Spain, and the U.K. government set to order pubs and restaurants in England to close at 10 p.m. in a bid to contain the virus’ spread.
After a 509-point decline on Monday, the Dow Jones Industrial Average was set to open slightly higher as Dow futures rose 42 points, while S&P 500 and Nasdaq futures also pointed higher.
In our call of the day, Ben Kirby, portfolio manager at Thornburg Investment Management said we may have already seen the market highs this year and it was time for investors to “head for the multiasset hills.”
“I hate to say it, but I’m telling investors that we may have already seen the highs for the year,” he said.
Kirby preferred stocks over bonds and recommended maintaining an above-average level of cash, as expected higher volatility ahead of the election meant “buying opportunities will be bountiful.” He added that Thornburg was in a “healthy risk-off / profit-taking mood right now,” following the historic recent rally.
When it comes to the sectors and stocks to play in the current market, Thornburg has plumped for high-yield, dividend-paying stocks. High-yielding stocks have generally outperformed the broader market for many decades, Kirby said, but have underperformed in 2020.
“We think high-yield, dividend-paying stocks pose a huge opportunity for longer-term investors: quality, compounding companies with sustainable and growing dividends should be increasingly sought after in a world where income from bonds is so scarce,” Kirby added.
He said the Thornburg Investment Income Builder Fund currently liked the global telecommunications sector, “a defensive sector with solid fundamentals, low valuation, high yield and has underperformed.” He particularly liked China Mobile, Orange and Deutsche Telekom, while retailer Home Depot was “another great name” that plays into the work-from-home and stay-at-home theme, he added.
This article originally appeared on MarketWatch.
