Global Investing Chief at Schwab Says Best Performing Stocks Due For A Surprise

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Jeff Kleintop, chief global investment strategist at Charles Schwab, believes value will outpace growth in the future.

Jeff Kleintop, chief global investment strategist at Charles Schwab, believes that value and international stocks will outpace former top US stocks in the future, according to Business Insider.

Following a significant sell-off when COVID-19 made its way West, investor sentiment started to increase and markets have gradually recovered. Cyclical stocks took longer to gain confidence from investors, but have recently surged.

Kleintop believes value and international stocks will outperform US growth stocks. "If that's sustained — and I think it will be by the ongoing economic recovery – this new market leadership in the second half of the year could catch a lot of investors by surprise," Kleintop said.

This occurrence is not unheard of. After growth stocks ran up during the dotcom bubble, value stocks took over until the 2008 financial recession. Since the Great Recession, growth stocks have dominated value, but now might be the time to transition.

US and international stocks have been involved in a similar cycle. Kleintop has determined that a regime change tends to coincide with an inverted yield curve, that demonstrates the end of an economic expansionary period.

Kleintop has acknowledged that he may be wrong given the massive gains raked in by growth investors over the past decade. "What do investors do when markets get difficult? They tend to backtrack," Kleintop said. "They look at old leaders and they expect them to be the ones that lead once again."

Kleintop is not betting against growth stocks or previous winners, but insinuated that it might be time to restructure your portfolio.

Three areas that Kleintop believes could emerge as market leaders:

  1. International stocks, investors can gain exposure to these stocks from the iShares MSCI EAFE exchange-traded fund.
  2. Financial stocks that are represented in the Financial Select Sector SPDR exchange-traded fund.
  3. Industrials, represented in the Industrial Select Sector SPDR Fund.

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