A.T. Financial Newsletter
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 look robust.

As well, with the average price/earnings ratio for the Shanghai stock market at 10.741 (versus 19.16 for the Standard and Poor’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 dragon’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 investment’s downside with strategies that can include investing in currencies, futures contracts, and arbitrage plays. There’s a whole sub-genre of equity funds that invest in these types of investments. And as you’d expect, some of them are significantly more risky than others.

Opportunities abound
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
MUTUAL FUNDS
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 Eurozone.

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.
That’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 BRICS’ 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 Game’s fans and the country’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 2016 Olympics.

Mid-year was also when Russia’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 there
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