Emerging Market Equities Outlook

A number of factors should be considered when evaluating the wisdom of equity investing in the emerging markets today.Andrew Swan,head of Asian Equities and portfolio manager with BlackRock,the world's largest money manager,lists the following:
1.Valuations are very,very defensive;
2.Most investors are out of the asset now;
3.The Fed is changing directions,getting more dovish.*
Improving momentum in the EM has just been for the past two months,said Mr.Swan.What you've seen is currencies appreciate and capital starting to come back to these markets.I do see growth weakening for the moment outside of Asia.*
Exports have been a very big headwind.If we do get a weaker dollar and higher materials pricing,global trade could start to pick up later this year,and that would benefit the EM,Mr.Swan pointed out.*
iShares Emerging Markets ETF (EEM),iShares Asia/Pacific Dividend ETF (DVYA)

WisdomTree Europe Getting Some Nods

We're heading towards an earnings trough,said David Kudla,Founder and Chief Investment Officer of MainStay Capital Management.The market will suffer from:
1.A Fed rate hike coming;
2.The strong dollar;
3.43 months without a 10% correction.
I still think we're in a long-term secular bull market.We're still positive on the US.We just think with the opportunities overseas and alternatives,you should look for negatively correlated investments because of the volatility we're going to see in the US.
We like the WisdomTree Hedged Europe Equity Fund.It's focused on mega caps that will benefit from a weak euro.Europe is embarking on QE,which inflates market value;while the US is embarking on tightening monetary policy.*
CNBC's floor reporter Bob Pisani also noted how popular this WisdomTree etf has been lately as it is hedged against a declining euro.*
Speaking at a press conference today,Fed chair Janet Yellen said a rate increase could be warranted at any FOMC meeting after April.We can't rule out June.*
WisdomTree Hedged Europe Equity Fund (HEDJ)

The Health of Markets:The View From Barclays

The US equity market is the market that we probably worry about most,said Jim McCormick,Barclays' Global Head of Asset Allocation.Valuations are starting to get stretched.Inflation is starting to be a problem.The truth is,inflation in the U.S. is picking up and is a trend likely to be sustained.If we are going to get a correction,the US equities are the most likely place.*
The message we have on emerging markets is,the macro picture is improving.Risk premia are higher than thery were a year ago.The asset calss we prefer is equities.We like Asia ex-Japan,Poland,India.The Indian budget is going to be very important.We're positive on India across the board.*
We've been increasingly bullish on commodities this year.Oil is attractive on all levels.If you look at the bottoms up on oil,it's been looking up for a long time,Mr.McCormick observed.

Asset Management:Inflows and Strategy

We had 8 billion of equity inflows in Q2,said Larry Fink,CEO of BlackRock,the world's largest asset manager.I do think for those investors overweight in bonds,I recommend moving some of it into equities,looking at your bond portfolio and moving it from your core strategy into unconstrained strategies.Expect to see tens of billions move to unconstrained bond funds. As more and more moves into etfs,we are gonna be lowering our fees.As of yesterday,we saw 6 billion of inflows into etfs this month.The market has come a long ways.We've seen some very good earnings,but I would never be surprised to see a 5% correction.I look at it as a buying opportunity. We own 5% of PepsiCo.We think Indra Nooyi is doing a very good job.We are very happy with her imaginative team and strategy. I think the Fed will move to a change of policy in the next six months.We should all be prepared.For investors focused on the long term,whether it's in September or December isn't important.We're gonna see a shrinkage of Treasury borrowing for the next five years,with as high as a 5% ten year by 2015,Larry Fink projected. PepsiCo(PEP),BlackRock(BLK)

Trust Company Distrusts the Market

This is a financially engineered market,said Michael Crofton,President and CEO of The Philadelphia Trust Company,engineered by central banks.Bonds and commodities are telling us that stocks are too high,and there could be a crash.
The pullback will come from a macro-event that will surprise everyone.The Federal Reserve won't be able to do much more to help.Those high points of similar markets in the past coincided with the peak of financial engineering.
We rotated out of consumer staples in March and into underperforming energy and technology.The rise of staples had been unsustainable.You just keep rotating,and when the music stops,you'd better hope you're sitting down.
The Philadelphia Trust is an independent private bank serving affluent investors and institutions.The company says it brings old-fashioned values such as attention and discretion into the post-modern world.It offers a full range of services,from custody and trading to income distribution,CDs and scheduled client reviews.
In equity investing,the Trust strictly adheres to the growth at a reasonable price discipline.
On Wednesday,the Federal Reserve said it would continue its quantitative easing policy of bond-buying to keep interest rates low,in effect driving investors more into equities.

The China Trade:Outlook For Equities

The last four years,stocks have done pretty well,but with volatility,according to Chris Blum,head of Global Equities at JP Morgan Private Bank.The volatility will be much less than in the last couple of years.Global coordinated central bank action will lower volatility and get people into equities.
People expect a 15-20% pullback,but those days are history.They will be in the mid-single digits.The key is that people have rules and follow them when things get tough.
We like China.That equities market has lagged the US by 30%.China has a much better balance sheet as a country.They are deficient in human rights.As it relates to fostering growth,I think it is a fantastic system.They reach decisions behind closed doors and implement them.
Citigroup says Chinese stocks will beat those of the G20 in 2013.The Shanghai stock index has risen 3.4%,the most since June 2012.
China is burning as much coal as the rest of the world combined,notes The Washington Post.The HSBC China PMI shows manufacturing expanding at the fastest pace in two years.
iShares FTSE China 25 Index Fund(FXI)

Asset Manager:Observations and Opportunities

It will reach a point where Spain needs the bailout package,said Mark Konyn,PhD,CEO of Cathay Conning Asset Management.Italy is not at all out of the woods yet.Overall,the whole process has been delay and delay and delay,to drag things out as long as possible.
With regard to the US fiscal cliff,everyone has some thing to lose in this.I think they will mediate a compromise that allows them to roll the whole thing over for twelve months hence.The cost of going over the cliff would be a massive setback globally,with a 4% GDP loss.
In Europe,Greece is not the main issue;Spain is.Investors are taking more risk in their bond portfolio.There are also opportunities within equities for taking on risk.They will continue into next year.
The catalyst for Chinese stocks is not there.In March,there will be some infrastructure spending in China.There will be some opportunities around that,Dr.Konyn pointed out.
Cathay Conning Asset Management is a provider of innovative asset management solutions to institutions and insurers in the Asia Pacific region,offering a differentiated suite of investment products and services.
Mark Konyn has a doctorate in Risk Analysis from London Metropolitan University and was a fellow at University College London.He is currently a Fellow of the Royal Statistical Society.

Managing Director:Where You Want To Be

There's a transition in the mix of growth coming out of China,according to Lisa Shalett,Managing Director at Bank of America-Merrill Lynch.We think it's going from infrastructure/construction/building to a consumption/services mix.
Our thesis has been to go with the best of breed in Europe.That means Siemens,Daimler Benz,Astra Zeneca.Investor fatigue and the overhang of issues are really in the U.S. market.
Mario Draghi,President of the European Central Bank,can learn a lot from Federal Reserve Chairman Ben Bernanke.The risk in Europe now is a deflationary bust.You want to be in high quality,dividend-growing equities and investment grade corporates.You want to be in companies,not countries.Be in the emerging markets and high yield debt,Ms.Shalett counseled.
Lisa Shalett is Chief Investment Officer of Merrill Lynch Global Wealth Management and Head of Investment Management and Guidance.With over 17 years' experience in the investment industry,she has a BS in applied mathematics and economics from Brown University and an MBA from Harvard Business School.
Bank of America-Merrill Lynch(BAC),Siemens AG(SI),Daimler AG(DDAIF),Astra Zeneca(AZN)

Asset Allocation:A Standard Chartered View

We believe the U.S. economy is stronger than most people believe it to be,said Steve Brice,Chief Investment Strategist at Standard Chartered Bank.We do believe we're in a more constructive risk environment,but it's not gonna be a straight line,in our opinion.
We are overweight global equities.The dividend yield in the U.S.,Japan and Germany is significantly above government bond rates.It makes total sense from a global equities perspective.We are also overweight corporate debt.We are overweight the U.S.,China and Korea.We do see high dividend yields in Malaysia,Mr.Brice added.
The case for buying Europe is based on the sentiment being awful;cheap valuations;shares trading at a 49% discount,versus a 20% premium in the U.S.;and the dividend yield at a 320 point spread to the German bund,according to Katie Koch of Goldman Sachs Wealth Management.The smart thing is to initiate or add to positions;but keep some dry powder.Up to 25% could be in emerging markets;the other 75% will include some exposure to emerging markets,which means you will have over half of your return from emerging markets,Ms.Koch explained.