RBC Wealth Management says it likes energy and semiconductor stocks

Look, we are. We continue to be committed to equities. We realize that the market, particularly in the US is expensive, lofty valuations, 20 more than 21 times forward earnings. And given the very strong rally we had since October, it is possible that there will be some trading weakness, some consolidation. But so long as the Fed cuts interest rates in an environment where inflation is coming closer to target and there’s only a slow, a small slowdown in economic growth, we think that the market can make new highs in the months to come. Certainly high valuation does not preclude that. So we may remain committed, but we’re also watchful because there are some lead indicators which it does suggest there could be a more marked slowdown. So by being cautious, we prefer to focus on high quality equities. So expand on that for me, what are those slow down indicators that you’re looking out for? Well, you know the yield curve inversion that is an indicator which we used to talk about a lot 18 months ago. It continues to point to some some difficulties. So within that mind frame, a cautious approach, high quality stocks, we do see still a lot of opportunities in the market. Energy stocks are in particular very cheap. They are a good hedge for against inflation, against geopolitical risk. We like also semiconductor the whole. The value chain from chip designers to foundry to equipment manufacturers, we think there are a lot of opportunities there as well as industrial companies which benefit from some of the megatrends that we are seeing such as digitization and electrification, perhaps even defense.