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Why it’s too late to be defensive

Nick Monte

Another day, another market milestone. 

The major U.S. indices seem to be at or flirting with all-time highs daily. After a strong earnings season and some positive headlines surrounding the trade war, the markets have potential to go even higher. But what does that mean for anyone who’s been sitting on the sidelines?

“I think it's too late to be defensive,” says Brian Levitt, global market strategist of Invesco Global. “So the defensives was when you were going from [fed funds] rates at 3.25% down to 1.50%. Right, that period has passed. So where you've wanted to be as the more cyclical parts of the market, the question I think, for most investors is do you want to be in the more value-oriented part cyclicals or do you want to be in the growth-ier part?”

For those who’ve been waiting to jump back into the markets, Levitt says there are still opportunities for investors. “As the economy recovers off of that really ominous environment in the middle of the summer, you want to be in the more value-oriented parts of the cycle. So those are things like financials and materials and energy and even industrials,” he said. “I suspect that this improving mix of growth doesn't get us to a new higher sustained level of growth, more a trend growth environment.”

While 28,000 for the Dow is a nice benchmark, Levitt says it’s just a stop along the way to higher returns. “We had some incremental progress on trade and then that got backed off a bit. So ultimately I think these markets go higher... it's just looking for another catalyst...” said Levitt. And when asked if the Dow will hit that 30,000 number in the new year he simply said, “absolutely.”

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