Taking the Bull by the Horns: What’s Next for Investors?
Investors can find value in emerging markets (EEM) as well, particularly in Asia. China (FXI), India (EPI), and South Korea are all witnessing rallies in their equity markets.
The current bull run is among the top five longest in history. Since World War II, the average bull market run has lasted 58 months.
Equities tend to outperform bonds and cash in the long term. So remaining invested is the important thing, throughout heightened volatility.
The case for international diversification indeed looks strong. International funds returned 4.5%. That’s higher than the 2.5% return from US equity funds.
Market volatility usually compels investors to park their funds in safe-haven assets like US Treasuries and commodities like gold and silver.
The markets entered choppy waters in Q1 2015 and faced multiple headwinds including the strong dollar and negative earnings revisions.
Stick to equities in the long run to get the best out of them. The CAGR for equities over the last 30 years, not considering the dividends, is 13.0%.
Large-cap firms tend to lose when foreign currencies depreciate. The logic is simple—the larger the market cap, the larger the geographic footprint.
The financial sector is first and foremost adversely affected by currency wars. As a result, SPY is outperforming XLF.
Since oil prices began to tumble and currency wars have picked up the pace, the energy sector has hugely underperformed the broader US economy (SPY).
According to EPFR Global, European equities saw a record inflow of $3.9 billion from US-based funds for the week ending March 20, 2015.
At the beginning of the year, investors expected US economic growth to fuel corporate earnings. In turn, this was expected to propel markets forward.
Mature tech stocks are likely to be a good value play this year as the US economy strengthens and both consumer and business spending receives a boost.
The promise of technology stocks has translated into solid deliverables with strong earnings growth.
Facebook has proven to be a game-changer by introducing the world to the concept of social networking, something quite unheard of in the Y2K era.
The NADAQ’s dominant players have changed drastically in 15 years. The top ten stocks today have only three stocks in common with the NASDAQ of 2000.
The better-diversified NASDAQ is less prone to risk than the NASDAQ of 2000. The NASDAQ is a different index now.
There are many reasons why you shouldn’t fear the NASDAQ’s (QQQ) 5,000 level this time around. The ghosts of Y2K are indeed in the past.
The NASDAQ hit the all-important 5,000 level on March 2, 2015, for the first time after the dot com bubble burst of 2000.
High yield bonds are becoming increasingly correlated with the S&P 500 and might increase your risk exposure instead of giving diversification benefits.
But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.