from ML, their midyear assessment
What's next for equities?
While the S&P 500 is near US equity strategist Savita Subramanian's year-end target of 2450, she still sees opportunities. Subramanian expects Value to outperform Growth amid a backdrop of continued improvement in corporate profits and potential for rotation out of crowded, expensive secular growth stocks. At the sector level, she sees the biggest opportunities in Financials and Health Care - where for Financials, her theses on cash return and less regulatory overhang have begun to play out, and for Health Care, the sector is cheap, very underowned vs history and her preferred alternative to Tech for secular growth. Against a backdrop of rising rates, Subramanian continues to prefer dividend growth stocks over those with simply high dividend yields.
RIC trimmed equity asset allocation
The Research Investment Committee (RIC) trimmed its asset allocation to equities to a smaller overweight, and raised the allocation to cash. It reduced the Tactical equity allocation for the Moderate risk profile by 2% to 56% from 58%. The proceeds are going to cash, which increases to 6% from 4%. The trimming of the allocation to equities for the Moderate profile reduces the overweight versus the Strategic benchmark to 3% from 5%. Within equities, the RIC is reducing the overweight to both Small Cap Value and Emerging Markets to equal-weight.
Top Internet sector ideas for the second half of 2017
Analyst Justin Post published his top ideas for the second half of 2017. In mega cap, he highlights Facebook for potential ad pricing growth, Instagram strength, and signs of approaching messaging monetization. In large cap, Post likes Expedia given he believes it has the best opportunity to accelerate growth vs peers. In the small/midcap group, IAC is his top pick on relative valuation, as it currently trades at a negative implied enterprise value based on its ownership in new entity Angie's Homeservices and Match. For year-to-date underperforming stocks with negative sentiment and higher risk, Yelp is his top stock pick.
