Stocks are setting up for a struggle on Thursday, with no good news on the COVID-19 front and vaccine optimism all but used up, for now.
And that budding value trade — buying hard-hit companies that would benefit from better economic times — is also showing signs of investor wobble as techs come creeping back. Granted, the value trade was tough for a decade versus those powerful growth stocks.
It may be different this time, Tobias Levkovich, Citibank’s chief U.S. equity strategist, told clients in a note. For example, he noted lopsided weightings in the S&P 500 SPX, -0.69% (35% belongs to the technology sector right now) have never endured in the past. And investors may need an income boost from dividend-paying stocks, which “tend to reside in the value camp,” he said.
Tapping into the latter point is our call of the day from Ben Kirby, co-head of investments and portfolio manager for the Thornburg Investment Income Builder Fund TIBIX, who said investors will need dividend-paying stocks headed into a year when tech returns may be less stellar.
Kirby noted penetration rates for tech companies are already high due to the pandemic. “So a lot of the tech spending has accelerated in the COVID period, and we think it’s pulling forward a lot of that demand that would have taken two or three years to play out,” Kirby told MarketWatch in a recent interview. Hence, a less rosy 2021 for that sector.
So what is he betting on for 2021? For starters, he’s keen on international stocks, which he said often offer up better dividends, such as European telecoms Orange ORAN, 2.21% and Vodafone VOD, -0.67% that offer high single-digit dividends.
U.S. offerings in the portfolio include JPMorgan JPM, -1.81%, down around 17% year-to-date, but still offering a dividend, and Home Depot HD, -0.40%, which is a play on a “tremendously strong” housing story that will run a long time, he said. And he does have a few tech stocks, but only where dividends are possible — Taiwan Semiconductor TSM, -0.29%, Broadcom AVGO, -0.30%, and Qualcomm QCOM, -2.07%.
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