Now that the fourth quarter is here, it’s worth taking a final take a look at how the remainder of the year is likely to develop. With three months delegated go, it still makes good sense to evaluate your portfolio to ensure you’re gotten ready for what’s most likely in store for the remainder of the year.
So, what exactly do I predict for this last quarter of 2014? Certainly, the world is awash in geopolitical uncertainty and this is likely to continue. But excellent news on the U.S. financial front should help temper worsening geopolitical tensions and slowing development in Europe.
Of course, an enhancing U.S. economy might have a disadvantage. If the Federal Reserve (Fed) increases interest rates prematurely or by too much, markets might be rattled. Another trend to enjoy: diverging growth. Europe and Japan are still struggling, while the U.S. continues to proof indicators of strength.
At the exact same time, stocks are on pace to finish the year with returns in the mid to upper single digits, and I still anticipate rates to rise, if only decently, for the rest of the year.
Against this backdrop, my associates and I share 5 portfolio moves to consider in our most current quarterly update to our 2014 outlook piece, “The List: What to Know, What to Do– Fall Update.”
Stick with stocks, but be choosy. While stocks are not low-cost, they still look appealing versus the options, namely bond and monetary, and the economic and financial environment overall remains encouraging of equities. Nevertheless, not every nation or market section is the same. So, as I have actually discussed in the past, investors must focus on relative value– in other words, do your comparison shopping throughout markets and sectors. Selectivity is vital. For more on where I see value today, check out my latest Investment Directions month-to-month market outlook piece in addition to the fourth-quarter 2014 outlook from the BlackRock Investment Institute.
Look outside U.S. borders. Increasing global direct exposure makes good sense in general, however much more so these days when most stock market deals are found overseas. U.S. stocks are not inexpensive, which has stocks outside U.S. borders looking even more sensible. Particularly, I see chances in Japan, which represents one of the couple of stock exchange bargains worldwide today, and in select emerging markets, particularly in China and other Oriental countries.
Choose your bonds wisely. There are still really couple of deals out there for individuals buying bonds, and some locations of the bond market are more susceptible to increasing rates than others. This implies it’s specifically vital to do your research and select your bonds wisely.
For instance, shorter maturation Treasuries, those with periods of 2- to five-years, are likely to be more susceptible to increasing rates than their equivalents with longer periods. In addition, with many traditional locations of the bond market looking expensive investors need to consider a versatile, go-anywhere technique. Lastly, financiers must give munis another look, if they have not already, as I discuss below.
Keep munis in mind. While no longer cheap per se after their phenomenal run in 2014, municipal bonds remain to look appealing versus both Treasuries and business bonds. For example, yields for longer-maturity munis competing or exceed those of their taxable equivalents on a before-tax basis, and this just enhances the after-tax value.
Go beyond conventional stocks and bonds. Finally, it’s worth thinking about incorporating non-traditional, or alternative, strategies into your investing arsenal. With such investments, you can possibly boost diversification and enhance your portfolio’s growth potential.
For more about these steps, and what to anticipate for the remainder of 2014, make sure to have a look at the full piece, “The List: What to Know, What to Do– Fall Update.”