Trends to watch as we head into 2015
may be cause for cautious optimism.
While there are a few funds that invest
specifically in the BRICS economies, a more
broad-based emerging markets fund might
be the most well rounded way to capitalize
on these economies.
Enter the dragons
Even without the rest of the BRICS, China
on its own remains a compelling
investment market. Sure, there was lots of
hand wringing this year, with particular
market noise related to the bubble in
Chinese real estate. But the country just
keeps on building, and companies with
exposure to gold, those in the services,
infrastructure, and consumption sectors
As well, with the average price/earnings
ratio for the Shanghai stock market at 10.741
(versus 19.16 for the Standard and Poorâ€™s
5002), Chinese stocks may be more
affordable than many of their peers. This
bodes well for mutual fund investors with
adequate diversification seeking to harness
the dragonâ€™s firepower without getting singed.
Another noteworthy development this
year has been the rise of so-called alternative
funds. These hedge-style funds seek to
minimize an investmentâ€™s downside with
strategies that can include investing in
currencies, futures contracts, and arbitrage
plays. Thereâ€™s a whole sub-genre of equity
funds that invest in these types of
investments. And as youâ€™d expect, some of
them are significantly more risky than others.
As you can see, there are some exciting
trends taking shape for 2015 and
investment opportunities for equity fund
investors from conservative to aggressive.
We would be pleased to review your
portfolio in light of ongoing developments
in the investment world at large and any
changes in your own life.
1china-stock.org, Shanghai Stock Market stat, August 26, 2014
2The Wall Street Journal Data Center (online.wsj.com),
August 22, 2014
It's fair to say that 2014 has been quite a year.
Here's a look at some of the key investment
stories of 2014 and what they might portend
for mutual fund investors in 2015.
Reinvigoration in Europe
Now entering its 12th year as an economic
collective, prospects for the European Union
remain positive. Yes, debt levels are still high
in southern Europe, but the black cloud of
2013 seems to be dissipating. Central banks
across the continent continue to hold the
course on rock-bottom interest rates,
employment is up, inflation is low, and
overall economic prospects are improving.
Admittedly, Russia's aggression in Ukraine
has dampened some of the enthusiasm, but
diplomacy, not to mention sanctions, could
win the day for the EU.
For many mutual fund investors, a broadly
diversified global equity fund will provide
sufficient exposure to the European markets.
If you are really bullish on the continent, and
comfortable with more risk, we could
consider funds that invest exclusively in the
BRICS and mortars
Even though the BRICS (Brazil, Russia, India, China, South Africa) account for half
the world's population and one-fifth of its
global economic output, their investment
prospects were somewhat overshadowed
this year by other emerging economies.
That is, until mid-year.
Thatâ€™s when the BRICS launched their
New Development Bank. First tabled back
in 2012, the US$100 billion collaboration
will almost immediately start funding
infrastructure projects in its member
nations and beyond. With increased
domestic spending, mutual fund investors
in the BRICSâ€™ economies may look forward
to another year of growth potential.
Mid-year is when Brazil hosted the
World Cup. The tournament was a huge
success, at least for the Beautiful Gameâ€™s
fans and the countryâ€™s 1 million foreign
visitors. Its residual economic impact,
however, was somewhat less rosy than
predicted. Blame for at least some of this
was placed on lost productivity as a result
of Brazilians enjoying a day off whenever
the national team played. Additionally,
many of the 12 host cities gave workers
time off to watch local matches. And of
course, countless millions without
sanctioned holidays no doubt called in sick.
The powers-that-be will surely take note
of this as the nation prepares to host the
Mid-year was also when Russiaâ€™s
hostilities with Ukraine boiled over onto
the international stage. It's possible that the
combination of strong-arm global boycott,
rising inflation, political and economic
uncertainty could send Russia into an allout
recession. On the plus side, as of this
writing, tensions appear to be easing and