Already a subscriber?A run in the ASX 200 has made outperforming the index more difficult than before. But equities strategists and fund managers are pointing towards retailers and other consumer discretionary stocks, as well as the industrial sector, as the best bet for shareholders – despite increasingly stretched valuations.
“There is the possibility that corporates will be able to outperform earnings expectations if consumers can loosen their wallets,” Mr Sherwood said. Brokers at UBS said earlier this week that the benchmark was already sitting at a “premium valuation”. It also expected economic conditions to remain sluggish for at least another six months and that earnings growth expectations of 4 per cent for this financial year was dependent in part on how “responsive” the RBA is in easing rates.MST Marquee equity strategist Hasan Tevfik also observed that valuations on the ASX were elevated.
“If you choose carefully among the retailers, they do look to be at reasonable share price metrics,” he said, adding that among industrial stocks Jamies Hardie, the building materials giant, would benefit from a pick-up in the US housing market.