InvestmentsMay 14 2013

BlackRock urges caution as FTSE nears all-time high

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ByEleanor Lawrie

As the FTSE recorded fresh highs, BlackRock chief investment strategist Russ Koesterich warns the tide may be turning as the defensive leaders of the rally start to underperform.

The FTSE has steadily climbed for the past six months, closing today on its ninth consecutive daily gain of 6,686, a five-and-a-half year high.

But Mr Koesterich has warned that cyclical sectors such as energy, industrials, materials and technology have started to perform better at the expensive of more defensive companies.

“The utilities sector is down sharply so far this month, while healthcare and consumer staples are also turning in weaker performance,” he said.

“We would argue that part of this reversal stems from the fact that many defensive areas of the market have grown somewhat expensive.

“The three sectors we mentioned earlier—utilities, healthcare and consumer staples—are now trading at an average premium of more than 10 per cent of the broader market.”