Market Overview

What Does The Future Hold For U.S. Equities Investment?

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The tapering of assets by the Fed has been a major point of discussion in the last few weeks. However, investors believe that this is not a reason to justify a pullback in the stock market.

Also interesting to note is the fact that the end to quantitative easing may possibly result in a bigger rallies in the equities market. This is because of the fact that investors now feel positive about the state of the U.S. economy.

As far as investment advice would go, the S&P 500 is now up 150% from the 2009 all-time lows. This year it has gone up by 20% meaning that the U.S. equities are a comfortable place to be.

Emerging Market and the equity market

The shift towards the equities also comes on the account of the fact that emerging markets are underperforming the S&P 500. The conditions are pretty similar to the Asian economic crises during 1998 that led to currency devaluation and upset financial markets globally.

Based on this scenario, investors should not get overwhelmed by the flood of financial investment advice. Instead they should focus on authentic and reliable free investment advice that is based on trend analysis rather than subservient means. This would hold true in the case of equities as well, since some aspects are more profitable than others.

Funds to look out for

The way the market is shaping up, it is better for a more conservative direction in terms of investment. Those looking for exposure in the emerging market should play safe. For instance, the Vanguard FTSE Emerging Markets ETF (NYSE: VWO) is a sound option. The reason is that the fund mostly deals in large cap equities and its holdings include Samsung (OTN: SSNLF), Bank of China (HKG: HK:3988) and China Mobile (HKG: HK:941) - all fiscally safe. Then there is also the fact that its dividend yield now stands at 4%.

Another notable mention is that of iShares China Large Cap Fund (NYSE: FXI). Investors’ confidence in this fund has been strong on the account of good industrial production data in China. It is now one of the popular Chinese ETFs and trading at 9 times earnings.  

On the local front, iShares JPMorgan USD Emerging Markets Bond (NYSE: EMB) is a good option for investors with fixed income. This ETF tracks the JP Morgan EMBI Index’s performance. These bonds are offering higher yields and are based on the performance of U.S. denominated sovereign bonds. Fundamental driven portfolios can use it for their advantage on long term basis.

Fiscal Analysis

As far as fiscal data is concerned, the net outflows in the equity area are now $2.6 billion, which amounts to 7.5% of the total assets (June to August).

The analysis that emerges from the data shows that investors that are earning profits from the equity market in U.S. are distributing it into other asset classes. This has to be tied up with the fact that the investors and financial institutions carry a huge amount of money in bonds. When these bonds assets would be relocated, they would create flows in the emerging market equities.

Based upon the status quo and the subsequent analysis provided, investors should continue to feel confident about the U.S. economy. The imbalance within the emerging market doesn't affect the U.S. investor and equity based investments appear to be the way to go.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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