David Fingold, vice president and senior portfolio manager, Dynamic Funds

FOCUS: U.S. and global stocks

MARKET OUTLOOK:

Given the recent volatility in equity and fixed income markets, we recommend investors approach markets with a focus on quality companies. We define quality companies as those with superior balance sheets, above-average profitability and consistent profitability. Recently recession risk has risen. Central bankers intend to tighten financial conditions through interest rate increases and tapering/quantitative tightening. We expect that should lead to high-quality securities outperforming low-quality securities.

Pent-up demand exists in some capital goods and certain financial institutions will benefit from higher interest rates. While consumers may face headwinds one would expect the leadership role in further economic expansion will be assumed by business investment as usually occurs when the economy passes through the mid-cycle. Defensive industries such as healthcare are attractive given their long-term performance and defensiveness as volatility tends to rise from this point in the cycle.

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TOP PICKS:

 Schlumberger (SLB NYSE)

 Headquartered in Houston, Texas, Schlumberger N.V. also known as Schlumberger Limited is an oil services company. The company, through its subsidiaries, provides a wide range of services, including technology, project management, and information solutions to the international petroleum industry as well as advanced acquisition and data processing surveys. After a lengthy down-cycle growth has resumed for the company.

AstraZeneca (AZN NASD)

 AstraZeneca PLC operates as a holding company. The company, based in Cambridge, U.K., through its subsidiaries, researches, manufactures and sells pharmaceutical and medical products. AstraZeneca focuses its operations on eight therapeutic areas, including gastrointestinal, oncology, cardiovascular, respiratory, central nervous system, pain control, anesthesia and infection. With few losses of exclusivity and a strong pipeline, the company has an encouraging earnings growth outlook. 

Allstate (ALL NYSE)

 Based in Northbrook, Illinois, The Allstate Corporation, through its subsidiaries, provides property-liability insurance as well as other types of insurance in the United States and Canada. The company primarily sells private passenger automobile and homeowners insurance through independent and specialized brokers. Allstate also sells life insurance, annuity, and group pension products through agents. We believe there is a firming price environment for personal lines.