XOP - BlackRock doesn't see rate cuts this year calls for 'granular' approach to stocks

2023-04-19 12:15:34 ET

BlackRock does not expect the Federal Reserve to cut rates in 2023 despite some degree of optimism in the market. As a result, the firm warned of potential volatility during the rest of the year, advising investors to consider a more "granular" approach to equities.

"U.S. stocks rose last week but lost steam on Friday on the market partly pricing out potential rate cuts. We don’t see cuts this year as core inflation stays sticky," BlackRock stated in a recent investor note on Wednesday.

BlackRock's view is out of step with the consensus on Wall Street. Markets have now priced in a nearly 61% chance that rates will come down by the year-end Dec. 13 Fed meeting.

Given the firm's projection, the world’s largest asset manager said that investors are in a volatile economic situation, which they believe warrants a new portfolio approach.

"We think strategic views need to be more granular - across sectors and within private markets. On a tactical, six- to 12-month view, we prefer granularity in sectors like energy and healthcare, actively selecting companies with quality characteristics," the firm stated.

For investors that are in agreement with BlackRock, listed below are a group of prominent energy and healthcare exchange traded funds that may be worth analyzing further:

Energy ETFs:

• Energy Select Sector SPDR Fund ( XLE )
• SPDR S&P Oil & Gas Exploration & Production ETF ( XOP )
• VanEck Oil Services ETF ( OIH )

Healthcare ETFs:

• Health Care Select Sector SPDR Fund ( XLV )
• iShares Biotechnology ETF ( IBB )
• iShares U.S. Medical Devices ETF ( IHI )

Looking at the day's market action, stocks dipped in Wednesday's early action amid the latest round of earnings reports. S&P 500 ( SP500 ) -0.1% , Dow ( DJI ) -0.2% , Nasdaq ( COMP.IND ) -0.1% .

In other related analysis, JPMorgan stated "We continue to believe a recession is likely this year,” as they believe the recent rally in stocks is irrational.

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