Blackrock: Focus on undervalued stocks

Blackrock: Focus on undervalued stocks

Helen Jewell, BlackRock's investment director, says the stock market's positive momentum is expected to extend to other market segments. European and Japanese stock markets are currently in a promising position, although rising interest rates and inflation could potentially have a negative impact. Jewell emphasizes that small and medium-sized companies are currently undervalued and investors should pay attention to this.

The outlook for the second quarter of 2024 is characterized by promising economic data and robust corporate profits. Despite a positive development in the stock markets, the expected return could be more subdued and extend to a broader range of market segments. Jewell highlights that possible interest rate cuts could help support companies with long-term growth potential.

The European and Japanese markets in particular are showing promising signs, with the valuation gap between US stocks and European stocks still significant. Jewell cites three main reasons why this gap could narrow, including a favorable market environment, potential interest rate cuts and increased demand for share buybacks in Europe.

Jewell's other recommendations include focusing on specific industries, such as pharmaceutical companies and industrial companies in Europe, as well as companies with expertise in energy efficiency and electrification in Japan. Additionally, it highlights the importance of selectively selecting small caps, as this category has outperformed the broader market over the past 25 years, but also comes with greater profit and loss potential.