Emily Roland, Manulife John Hancock Investments co-chief investment strategist, joins 'Power Lunch' to discuss why now is the time to take profits from equity investments, where to put money and much more.

US stock markets, including the S&P 500 and Nasdaq, have reached record highs, though some blue-chip stocks are lagging. Investment strategist Emily Roland recommends investors consider taking profits and shifting some assets into defensive sectors such as health care and utilities, while maintaining exposure to technology and communication services. 

Roland highlights the importance of focusing on stocks with strong fundamentals, such as high return on equity and stable cash flow, and suggests using valuation metrics like the PEG ratio to manage risk. She also notes that European financials have outperformed globally, despite weak earnings, as investors rotate capital out of the US. Overall, the current market environment is characterized by broad gains and a 'buy the dip' mentality, but experts caution against overreaching for risk.

Markets are at all time highs. Here's where you should redeploy assets

But let's start with these markets. As we just heard Brian mention, the S&P and Nasdaq record highs again. Some of the blue chips, though, like United Health, Honeywell, IBM, those are dragging the Dow down half a percent. Our next guest says it is time to take some profits. She likes tech, but is also getting defensive with these health care and utilities plays. Joining us now is Emily Roland. She's the co-chief investment strategist at Manulife, John Hancock. Emily, it's good to see you. So is it time to look at, you know, again, look at the news flow on United? You know, it reminds me of Boeing a few years ago. Is this a moment for you to get into some of these health care names? And if so, why? What we're looking at right now is really finding opportunities where there's an intersection with solid technical trends. Momentum by far has been the best performing factor this year, chasing winners. We want to be there, but we want to think about combining that with quality. So looking for opportunities and stocks that have great return on equity, good free cash flow, really an ability to maintain margins at a time that they're coming under pressure. So that's leading us to overweights in areas like tech stocks, communication services, health care and utilities. One thing we've been looking closely at is the PEG ratio. I don't want to get too technical here. I've been talking about this. PEG ratio is having a moment. Go ahead. It really is. And it's about kind of not just momentum, but quality momentum. So it really measures how much you're paying for future earnings growth. We want to be thinking about ways we can manage valuation risk while still participating in markets, because a lot of things are going right. The technical trends are there. Earnings growth is holding in the economy is doing all right. The biggest risk to markets right now is that there is no risk. The S&P 500 is trading at 22 times forward earnings. Twenty four is the highest we've ever gotten to in the late 1990s. High yield bond spreads, which were a measure of how much risk is being thought about in the market at 280. The tightest we've ever been is 230. That's back in 2007. So we just want to be mindful of here of reaching too far for risk in a period where there is a significant sense of overvaluation across assets. You're making Emily, you're making all great points. The problem is nobody has seemed to care if your name's not in video or has attached to it. The markets have kind of ignored it. Well, there has been some broadening out, you know, in areas like lately. Yes. Late. Very lately. Financials, industrials. Really, honestly, Brian, everything is up. This is just one of those everything rallies where markets are brushing off every risk that's come its way. And we've also seen tariffs really lowering the bar for earnings as well. Five percent earnings growth was a low bar after double digits last quarter. And we've had this cacophony of events from tariff announcements to supply chain concerns to this massive rollercoaster of sentiment with consumers having deeply, deeply negative sentiment to start the quarter. And now we're seeing just absolute surging sentiment. So there's been a lot for companies to navigate. And I think analysts are saying, hey, you did a pretty good job and you maintain profitability here. You get an A plus. Right. But basically, we you know, it's it's always you look, you go, OK, let's say the market faces some turbulence. Fine. Like, for instance, we go back to December, January. We're having some similar feelings and we ended up with this big sell off. But look at the performance coming out of the sell off. You know, health care is still atrocious. Tech is still leading. So it just makes you wonder if you rotate, you're going to rotate in what? Try to then rotate back as soon as the correction's over. It just maybe that's what professional management is. But it feels like it's like really hard to do all of that timing. Yeah, there's a definitely a buy the dip mentality. You know, one thing that I would point to, though, is everybody's talking a lot about tech, but actually the best performing asset globally has been European financials. That has been the tree, just absolutely incredible performance there. And frankly, the earnings haven't been there. So we've seen this sentiment driven rotation, capital flows leaving the US and actually investors allocating assets towards Europe. And just again, negative earnings growth and 30 plus percent returns a year to date for European financials.

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Breakdown