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April 28 2015, 08.15am GMT


Could this be the perfect time to cut exposure on large-cap equities before it’s too late? Read on for what top analysts have to say.

Stocks have lately recorded incredible runs which have seen them soar to great heights and closing records. The S&P 500 index (SPX, -41%) and the Nasdaq Composite index (COMP, -0.63) have also been breaking previous records. In fact on Thursday last week, the Nasdaq tore down its previous record which has been in place for 15 years. The S&P 500 index has also put on a top performance breaking through some past record closes.

As a result of these top performing indices, Wall Street analysts are now stepping out to caution investors on the impending peril by calling for U.S. stock exposure cuts. In fact, S&P Capital IQ’s Investment Policy Committee as well as Citi Private Bank have also gone on record recommending investors to reduce their exposure to large-cap U.S. stocks. Added to this, in an interview with MarketWatch last week, Blackrock’s Russ Koesterich also stated that, “Diversification at this point is critical.” The statement was a recommendation to investors to cut exposure on large-cap equities in favor of inexpensive international stocks.

The sentiments were also echoed by Steven Weiting who is currently Citi Private Bank’s global chief investment strategist. In a note drafted to investors on April 23rd, Weiting wrote, “We have reduced our overweight position in U.S. large capitalization equities from +3% to +2%.” According to Weiting, as a result of the volatility in U.S. energy investment, this has contributed to the weakening of U.S. equity outperformance.”

Also in a note to investors dated April 22, S&P Capital IQ recommended that traders reduce their exposure to U.S. stocks from 50% to 45% while increasing cash holding from 10% to 15 percent of their total portfolios. S&P Capital IQ wrote, “Reasons for our reduced optimism toward U.S. equities include a traditionally soft seasonal stretch for stocks, the rich forward 12-month valuation, time since the last correction, and the expectation that interest rates and inflation will creep higher in the coming year.”

Although the upward trend exhibited by the U.S. stocks can continue, investors are advised to stay at high alert.

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