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Eaton Vance executive sees market shift ahead

Duncan Richardson expects a move from bonds to stocks.

Duncan Richardson expects a move from bonds to stocks.

Eaton Vance’s Duncan Richardson notes 2012 is the Chinese Zodiac’s Year of the Dragon — and just as the dot-com bubble peaked during the last Year of the Dragon, US Treasury bonds’ long-running rally might end soon. “What we’re suggesting is that there may be a [market] turn at hand,” said Richardson, chief equity investment officer at Boston-based Eaton Vance. Here are excerpts of Richardson’s thoughts about what 2013 holds for ­investors:

 What do you mean by Year of the Dragon?

The last Year of the Dragon was in 2000, and it would have been hard to convince people then to buy anything but large-cap growth stocks in the United States.

But that turned out to be a horrible investment. There’s been a similar pattern of performance [today] in fixed-income and interest-sensitive assets. But there may be a major shift — a multiyear shift — in preference of asset classes ahead.

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 A turn away from bonds and toward­ stocks?

Yes. Ben Bernanke has been pretty adamant that he thinks the stock market going up would be a good thing, and I think he’s going to get his wish.

 What stock sectors do you ­recommend?

In an uncertain world, people will gravitate toward the bluer chips and dividend-paying stocks. The nice thing is that you’ve got an increasing menu to choose from in dividend opportunities. Typically, it’s been utilities and telecoms, but those look somewhat expensive relative to the opportunities in health care, energy, and — surprisingly, because this wasn’t the case in the go-go days — technology.

 But dividend-paying stocks have already had a healthy run-up over the past year. Have investors already missed the boat on buying them?

You definitely have not missed the boat on dividend stocks. They’re not done going up.

How about investing overseas?

The underperformance of emerging markets has brought them down to a bit more attractive valuation levels, and the same could be said for Europe. But you’re dealing with very dicey dynamics there. The United States has a lot going for it in terms of demographics, relatively better energy prices, and relatively better immigration policies than most other major investment geographies. So I have a slight preference for US stocks.

Jerry Kronenberg can be reached at Jerold.Kronenberg@gmail.com.
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