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Equity markets are poised for a retreat after reaching record-high rallies, said BlackRock's top investment strategist.
Russ Koesterich, the global chief investment strategist at BlackRock, said the magnitude of recent gains in the stock market is causing some indicators to "flash yellow."
After spiking a couple of weeks ago, volatility measures have again fallen, suggesting that market complacency may be indicating investor wariness that the market can climb much further. A pullback in stocks appears to be in progress, Koesterich said.
The BlackRock strategist also said corporate earnings growth has not kept pace with stock price gains, meaning that valuations are less attractive than they were a few months ago even though they remain cheap compared to bonds and cash.
"While none of this means that the rally is over, it does suggest that investors should become more selective as they look at potential investment opportunities," Koesterich said.
U.S. mega-cap stocks look particularly attractive in this regard, offering compelling valuations and high profitability, he said. In contrast, small-cap stocks are looking relatively expensive in his view.
In midday Wednesday, the
S&P 500 was off 0.11% at 1,550.68 on midday on Wednesday following the gauge's seven-day winning streak that pushed the index to its highest level in more than five years.
Dow Jones Industrial Average was dropping 3.46 points, or 0.02%, to 14,446.6 after the blue-chip index on Tuesday recorded an eighth-consecutive winning session, catapulting the gauge to a record high.