Global Outlook report advises investors to remain overweight equities, but shift allocation toward European and Asian stocks and even to some areas of fixed income.
The postponement of Federal Reserve tapering should focus investor attention on when US data will finally confirm a robust improvement in growth. While better growth has not shown up yet, there is reason for optimism going into 2014, according to Barclays’ latest flagship quarterly research publication, Global Outlook: Growth Takes Center Stage.
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The investment case for equities remains intact, but the surge in bond yields and continued rise in stock prices justifies a move toward a more balanced position between equities and bonds.
Larry Kantor, head of research, said: "US economic data are unlikely to confirm lift-off in the next couple of months, but conditions are aligned for a significant improvement as we move into 2014. This will bring the Fed back into play, cause another leg up in bond yields and could well generate some retracement in stock prices, although most likely from higher levels than where we are now."
The case for a sustained period of solid growth in the US is strong as we move into 2014. This means that US stocks may still have room for further appreciation, but they are starting to look more expensive relative to other global stock markets, calling for some rebalancing in favor of European and emerging market stocks, particularly in Asia.
In fixed income, the sharp sell-off that took place in reaction to the expectation of Fed tapering has created tactical opportunities in emerging market corporate credit, some emerging market sovereign bonds, and select US municipal bonds.
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By GlobalData
