Investment correlations that favored passive investment strategies are likely to break down while the bull market nears its end, favoring strong pickers. Look to emerging markets for some of the best opportunities.
Four months into the year and the global economy is in the midst of synchronized growth that should allow it to grow around 3.5 percent this year. China’s solid growth, India’s recovery after the monetarization jitters and the eurozone’s stronger-than-expected growth have been the catalysts for the strong showing this year.
The current policies of the ECB were designed to fight deflation and financial fragmentation in the eurozone. Currently, though, stronger economic activity, easier access to credit, lower borrowing rates and weakening deflation pressures open the door for tightening, even if only gradual in nature.
China is the stock market investors love to hate. The conversations are always about what could go wrong and rarely what could, or will, go right. And yet China’s equities have outperformed emerging markets during the past one-, three- and five-year periods. For the past year, we’ve made the case that cyclicals and growth names should be the focus when investing in China.
For some time, mining companies thought diversifying their portfolios was the best way to improve cash flow stability and protect themselves from natural resources cycles and increased volatility. That hasn’t worked, at least not as expected.
Investors rightly worry that a Le Pen victory could change the euro picture overnight and cause initially hazardous reaction (e.g. European stock markets fall 20-30 percent). Other regions won’t escape such a sell off. Remember that the S&P 500 fell close to 20 percent in May 2011 when fears of Greece exiting the eurozone surfaced. Our view is less alarmist.
Results from the recent Dutch elections removed one engine of political uncertainty in the eurozone. Will this year's remaining European electoral calendar echo this outcome and release an economy ready to accelerate?
China is the stock market investors love to hate. The conversations are always about what could go wrong in China and rarely about what will go right. And yet Chinese equities outperformed other emerging markets during the past one-, three- and five-year periods.
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