“Everybody seems to know when long-term interest rates rise you don’t buy long-duration bonds. But what people forget is you also don’t want to buy long-duration equities,” Bernstein, CEO and CIO of Richard Bernstein Advisors, told CNBC’s “Trading Nation” on Wednesday. “What’s a long-duration equity? Simply put, it’s one with a high P/E [price-to-earnings ratio].”
“There were tons of promises made about what the future was going to look like. Those promises came true between 2000 and 2010. Largely, they came true,” he said. “But the tech sector gave you negative absolute returns for a decade.”
“I don’t think too many tech investors today are prepared for negative absolute returns for three, five or 10 years,” he said.
“If the nominal economy is getting stronger, you want stocks that are going to be very sensitive to that improvement in nominal economy,” Bernstein said. “That outlook for the next several years is probably going to favor cyclicals over more secular growers.”