Government Yields Too Low, Bonds Too Risky

Stocks appear inexpensive based on price-to-earnings ratios, but Stattman said he expects profit margins will shrink over the next few years. He is also worried that stocks will be hurt when the Federal Reserve eventually ends its aggressive measures to stimulate the economy. On the other hand, BlackRock is "very underweight" bonds in the allocation fund, he said. "You are not getting any reasonable sort of coupon on any of the world's sovereign debt," Stattman said.

Given the risks to equities, BlackRock favors large-capitalization stocks paying relatively high dividends. Top holdings at the end of March included Exxon Mobil (XOM), General Electric (GE) and IBM (IBM), according to BlackRock's web site. "The global integrated oil companies seem dirt cheap to me," Stattman said. "They seem to be compelling investments."

Source: Reuters

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