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Global investment and multi-asset strategist at Wellington Management, Jacobson, believes the improvement in monetary tightening and strong fundamentals in market will favour equities over bonds. Equity strategists believe the global equity markets have interesting opportunities in the European and Japanese companies where the Japanese companies will see growth due governance reforms and corporate reforms.
Global trends in equities
Best performing equities will be the dividend orientated mid-cap in the US, although, the risk includes the errors in policies of Central Banks, earnings disappointments and impact of geo-political tensions on the markets. It is assumed in future, there will be greater access to the China (Class A shares).
US treasury risks are high, as the overall borrowing is expected to remain high.
Even China reduced its foreign reserves, significantly, furthermore, the oil exporting countries are now, net borrowers.
Emerging markets such as Japan’s stock markets are offering opportunities where support of technology can improve economic productivity. Analysts believe Japan economic policies are highly supportive and their valuations are reliable.
The experts are bullish on upcoming emerging markets and bearish on the European markets
Europe has been the fastest growing economies, and it hosts the best of all consumer and business confidence, but is subjected to global cycles. The European Central Banks (ECBs) are facing constraints, and the German market is vulnerable to volatility. The expansion in employment and consumer can reduce its sensitivity to such volatility.
In Japan, consumer confidence is high, cash flow is increasing, and the businesses are getting record profits.
Multi-asset portfolio is the new trend and the biggest challenge of the year will be - how to use traditional options along with other risky assets.
Preferring equity over bonds
Most equity markets are better options as compared to bonds, as the equities are based on price to earning, and equities can trade higher in the coming years. Stocks and bonds of emerging markets can result in appreciation.
In the today’s global economy, the countries driven by domestic markets are self reliant.
Moderate increase in rates driven by inflation can help equities to outperform bonds.
Corporate investment (mergers or acquisition), equities, real estate and currencies are some of the ever-growing investment themes.
Risks - How to forecast downturn?
A decade after the global crisis - markets are realizing their weak points and identifying the excesses responsible for the bubbles, where weak markets and bubbles are caused by unrealistic monetary policies, and negative interest rates in bonds.
Stock requires to be watched closely for short and medium-term, and one should take account of the build ups.
Economic data, business and consumer confidence are volatile factors, and a recession can not be predicted from these.
Downturn or economic crisis comes as a shock when the economy goes out of balance and this happens when yields are low and the credit spread is high.
Strategists believe some of the new risk sectors are automotive and technology. These sectors will be vulnerable to regulatory risks.
To get a detailed analysis of global trends in equities, visit 99 Alternatives (http://www.99alternatives.com).
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