While the Fed is committed to a policy of reflation, market conditions pose significant obstacles to success and there are also serious inflationary risks associated with this policy.
While structured products may benefit investors that seek principal protection or have a differentiated view from that of the market, they are not normally the best investment choice due to their high costs and complicated structures.
We continue to view U.S. equities as overvalued based on both valuations and the difficult economic environment, but advocate tactical bets within U.S. equities rather than a substantial underweight.
Negative investor sentiment and susceptibility to the effects of a global downturn make Japanese equities a risky short-term proposition, but valuations, relatively steady economic fundamentals, and strong corporate profits argue for an overweight position on the part of those with the patience to tolerate any potential short- to intermediate-term underperformance.
For the time being investors should avoid large bets on European property and should be in no hurry to ramp up allocations.
While there are legitimate reasons to believe that diversification of foreign exchange reserves by central governments will support an asset boom, diversification of reserves carries manifold implications that will likely play out over an extended period.
With investor interest in global equities continuing to ramp up, index providers are working overtime to ensure that they meet the evolving needs of investment managers and investors.
Benchmark indices for Asian small caps differ significantly, indicating the substantial judgment required of managers in this space.
Despite the potential for short-term bumps in the road, the Asian growth story remains compelling.
Investors in China-based indices should recognize their new exposure to the big Chinese banks in the aftermath of the banks’ IPOs—and the potential risks inherent in such exposure.