Jefferies analyst: Invest in Cyclical Stocks And Growth Stocks at the Same Time to Cope with Market Changes

Christopher Wood, global head of equity strategy at Jefferies LLC, said that in the face of high inflation and the possibility that the central bank may further shrink the currency, using the “barbell strategy” to balance offense and defense is still an effective strategy to deal with market turmoil.

Wood went on to argue in the latest report that investors should have both cyclical and growth stocks in their portfolios.

He noted that structurally higher inflation should support cyclical equities, while growth stocks would also benefit if G7 central banks continue to favor easing over policy tightening in a meaningful way.

Wood said rates were artificially low despite high inflation in the world’s major economies. Compared with the United States, the European Central Bank is less willing to raise interest rates, and the Chinese central bank has recently started to ease monetary policy in order to stabilize the economy. That way, growth stocks would still benefit.

However, due to the fact that the inflation rate is still high, and countries continue to push the policy of devaluing currencies, gold and Bitcoin are still indispensable safe-haven tools for investors.

To assess the long-term downward trend in money turnover, and whether or when it will reverse, instead of looking at changes in asset purchases, growth in credit financed by real economic activity remains the most critical variable to monitor, Wood noted.