While the U.S. economy is improving, with a growth rate of about 3% and positive signs in the job market, investors should also pay attention to emerging markets around the world with lower stock prices as a way to diversify their portfolios.
“We’re seeing stocks cheaper in the emerging markets than we’ve seen in a long period of time, and investors should at least be open to a more global, multi-asset, diversified portfolio than just focusing on what’s going on in the U.S.,” says Mark Eibel from Russell Investments.
Developing countries, also known as the emerging markets, are becoming the driver of global growth. Of course, investors should bear in mind the additional risks emerging markets bring to an overall portfolio.
“Having at least some of your assets in a more globally diversified portfolio can be a good investment solution,” adds Eibel, who visited Puerto Rico recently to meet with Popular One advisors and clients to discuss his general outlook on the U.S. economy, the global markets and the investment opportunities available in emerging markets.
Russell Investments is a global asset manager that offers actively managed multi-asset portfolios and services that include asset allocation, investments and implementation.
In terms of the bond market, Eibel says investors can expect a slow improvement in yield as the U.S. economy improves, but he adds “we’re at a key inflection point in the markets for 2014, as evidenced by the contrast between optimism among equity investors and uncertainty for bond investors.”
“The overall investor experience will likely be much more modest for bonds moving forward. It’s not a horrible environment for bonds; it’s just a slow and steady increase with much more modest returns,” he explains.“ But bonds still serve the purpose of portfolio diversification.” Regarding particular sectors to watch in the U.S. stock market, Eibel points out healthcare as a segment that is providing strong results.
“That might surprise people because healthcare is one of the most politically charged segments of the market, yet managers have found great opportunities there. I think it’s because it’s an area that is a great demographic play because the population is getting older, but it also serves different types of investors. More aggressive investors might be more interested in the biotech companies while more conservative ones might invest in big pharma companies that are more consistent and provide dividends.”
Enrique Gelpí, vice president of Popular Securities’ Consulting Group, explains that while Russell Investment’s role is to build portfolios, the role of Popular Securities’ advisors is to know their clients and their needs so they can make the proper recommendation on which of those portfolios to invest in, and to provide ongoing advice as markets and clients’ needs evolve.
“We have a great partnership with Russell Investments because they’re very consistent. They’ve been doing this for decades and they look for opportunities all over the world for the benefit of our investors,” he concluded.