May is drawing to a close and the S&P 500 is inching its way back to record highs.
There are lots of reason to remain optimistic heading into summer, according to Ben Kirby, co-head of investments and portfolio manager at Thornburg Investment Management, which has $48 billion assets under management.
“The economy is on really firm footing and it’s not just the U.S. economy, it’s the global economy,” Kirby told CNBC’s “Trading Nation” on Thursday. “The economy is probably peaking or sort of at peak growth. … Europe is reopening, emerging markets are reopening. I think that there’s a lot of economic momentum that supports continued risk asset prices.”
Kirby highlighted three investment buckets that look favorable in this high economic growth environment. The first, value and cyclical stocks, should get a lift as the economy rebounds off its pandemic lows.
“The value-versus-growth debate that’s been going on for a long time, we’re pretty firmly in the camp for preferring value and cyclical,” he said.
The IVE value ETF, which holds financials and economically sensitive industrials among its components, has already well outperformed the IVW growth ETF, which has a large focus on tech. The IVE is up 17% this year. more than twice the IVW’s 8% gain.
“I would add to that companies that pay dividends,” he said. “At a time when income is hard to come by, when yields are low, spreads are low, dividend yields are low kind of around the world, if you can find companies that have yields of 3%, 4%, 5%, that’s actually really interesting in this environment.”
Kirby is looking beyond the U.S. for his third top investing idea — international equities.
“U.S. stocks are trading at pretty high valuations. European equities aren’t, and actually Europe is behind the U.S. in the reopening trade, so the combination of those three things I think make a lot of sense,” he said.
The MSCI eurozone ETF, for example, trades at with a 17 times forward multiple, while the S&P 500 trades at 21 times.
