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A 30-year market vet and former BlackRock stock chief breaks down the 7 best opportunities he sees right now in an 'expensive' stock market that's getting increasingly difficult to trade

Published by Business Insider on Tue, 08 Jun 2021

<p><img src="https://static1.businessinsider.com/image/60be74bbe459cb0018a2c885-2400/BD Headshot - May 2021.jpeg" border="0" alt="BD Headshot May 2021" style="display: block; margin-left: auto; margin-right: auto;" data-mce-source="Crossmark Global Investments"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Like <a href="https://www.businessinsider.com/category/michael-jordan">Michael Jordan</a> or <a href="https://www.businessinsider.com/category/rob-gronkowski">Rob Gronkowski</a>, <a href="https://www.businessinsider.com/category/bob-doll">Bob Doll</a> wasn't really retiring.</p><p>He just needed to reassess his career.&nbsp;</p><p>"I 99% knew that I wasn't done with the asset management business, and wanted to reassess where I might try to make a difference, and Crossmarkat the end of the day of the choices I had, fortunatelywon the race," Doll told Insider on June 3.</p><p>Earlier this year, Doll briefly stepped away from a career spanning three decades with firms like Oppenheimer, <a href="https://www.businessinsider.com/category/blackrock">BlackRock</a>, and most recently <a href="https://www.businessinsider.com/category/nuveen">Nuveen</a>. Then last week faith-based Crossmark Global Investmentswhich Doll said he was attracted to because of its values set and relatively small sizeannounced they'd taken on Doll as their chief investment officer.&nbsp;</p><p>And he hasn't missed a beat since leaving Nuveen, resuming his market commentary upon being hired at Crossmark, which has $5.7 billion in assets under management.&nbsp;</p><p>Right now, Doll said that he doesn't see the broader market as being in a bubble because of the strength of the economy and earnings, but that there are pockets of speculation, like in some cryptocurrencies and meme stocks.&nbsp;</p><p>However, he also doesn't necessarily like where the market sits at the moment, either. Given current valuations, Doll said he thinks the S&amp;P 500 will return 3-4% per year on average over the next decade, or 5-6% when including dividends.&nbsp;</p><p>He said this is the biggest thing investors need to know at the moment is that stock indexes have poor return prospects going forward because of the appreciation they've seen in the last year-plus.</p><p>"You look in the rearview mirror, and it looks like I just put my money in the <a href="https://markets.businessinsider.com/index/s&amp;p_500">S&amp;P 500</a> and I'm going to get 15% compounded for as far as the eye can see. Well, that's not sustainable forever," Doll said. "It's not going to be the double digits that we've enjoyed in recent years, and the sole reason is the starting point of both stocks and bonds from a valuation standpoint is not cheap."</p><p>This is a view that's widely shared on Wall Street. Many major investment banks are essentially <a href="https://www.businessinsider.com/stock-market-returns-wall-street-banks-valuations-goldman-ms-bofa-2021-4">advising against owning the S&amp;P 500 index</a>. Strategists at <a href="https://www.businessinsider.com/category/bank-of-america">Bank of America</a>, for example, said earlier this year that they predict the S&amp;P 500 will return an average of 2% per year over the next 10 years, pointing to precedent for the important role that high valuations play in determining future performance.</p><p><img src="https://static6.businessinsider.com/image/609ee44cf27b4c0019444a20-798/6079e7b674da0300181e2380.jpeg" border="0" alt="A bar graph showing the price to normalized earnings predictive power on subsequent holding period returns since 1987." data-mce-source="Bank of America"></p><h2><strong>7 opportunities in the market right now</strong></h2><p>Despite opportunities drying up and the overall market being "expensive," Doll still sees areas where investors can find returns.</p><p>On a broader level in US markets, Doll likes <strong>cyclical</strong> and <strong>value stocks</strong>, as he thinks investors will continue to rotate out of the most expensive growth names like they have in recent months amid rising bond yields and spiking inflation. The two areas of the market have seen <a href="https://www.morningstar.com/articles/1039812/value-funds-strike-back">strong outperformance</a> over the last seven months.</p><p>More granularly, Doll likes <strong>financials</strong> and <strong>cyclical parts of the consumer discretionary sector</strong>. He's also bullish on "deeper cyclicals" like <strong>industrials</strong> and <strong>metals</strong>, but said investors should wait for a pullback in the energy sector.&nbsp;</p><p>Investors can find exposure to the above sectors in funds like the Vanguard Value Index Fund (<a href="https://markets.businessinsider.com/etfs/vanguard-value-index-fund-etf-shares-us9229087443">VTV</a>), the Consumer Discretionary Select Sector SPDR Fund (<a href="https://markets.businessinsider.com/etfs/consumer-discretionary-select-sector-spdr-fund-us81369y4070">XLY</a>), the iShares US Financials ETF (<a href="https://markets.businessinsider.com/etfs/ishares-us-financials-etf-us4642877884">IYF</a>), the Fidelity MSCI Industrials ETF (<a href="https://markets.businessinsider.com/etfs/fidelity-msci-industrials-index-etf-us3160927097">FIDU</a>), and the Invesco DB Base Metals Fund (<a href="https://markets.businessinsider.com/etfs/invesco-db-base-metals-fund-us46140h7008">DBB</a>).&nbsp;</p><p>Doll also likes <strong>international stocks</strong> due to the slower economic recovery unfolding in most of the rest of the world relative to the US due to slower paces of vaccinations against COVID-19.</p><p>The Vanguard Total International Stock ETF (<a href="https://markets.businessinsider.com/etfs/vanguard-total-international-stock-index-fund-etf-shares-us9219097683">VXUS</a>) offers exposure to global stocks without exposure to US markets.</p><p><a href="https://www.businessinsider.com/stock-market-investing-strategy-7-best-opportunities-expensive-bob-doll-2021-6#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/how-long-human-survive-outer-space-without-spacesuit-2017-5">How long humans could survive in space without a spacesuit</a></p>
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