Investors Should Look to Japan, China for Buying Opportunities

The U.S. market is not just in record territory, it's in "expensive territory," said Casey Clark, vice president of investment strategy at Glenmede Trust.
By Gregg Greenberg ,

The U.S. stock market is not just in record territory, it's in "expensive territory," said Casey Clark, vice president of investment strategy at Glenmede Trust.

"As we enter the late stages of the economic expansion, return prospects are below average and the propensity for volatility is high," said Clark. "Still, we don't think that investors should abandon U.S. stocks. We are recommending a neutral weight to U.S. equities with a bias toward high quality and defensive strategies."

That said, Clark does not see bonds as much of a bargain either.

"With central banks pushing yields lower, we recommend for investors to underweight fixed income and, for those who can accept greater levels of risk, invest in targeted high yield opportunities," said Clark.

Seeing both U.S. equities and bonds too pricey and volatile, Clark said investors should consider looking abroad for opportunities, specifically Japan where Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after an impressive election victory last week. The Japanese Yen has weakened by 5% in the past week to 105 per U.S. dollar, helping lift the Nikkei 225 7%.

"We expect Japan to enhance fiscal and monetary support in the coming months to combat Yen appreciation and low inflation expectations," said Clark.

Staying in Asia, Clark is bullish on China as well, saying it will remain at the forefront of investors' minds for the foreseeable future as the government pushes the country from rural to urban living, from public to privately run corporations, and from government-led investment to consumer-led spending.

"China remains one of the world's biggest consumption stories," said Clark. "While there will be some bumps in the road as the economy shifts from manufacturing to services, this should not be overlooked."

Finally, when it comes to the U.S. presidential election and its influence on stocks, Clark said the statistics simply do not prove a link between the two. And irrespective of who gets in office, Clark contends there will be an ongoing situation of politically gridlock, something he views as positive for the market.

"Surprisingly, over history, political gridlock has been relatively good for the market with the S&P averaging 10.4% annually during periods of some political gridlock and only 5.6% when one party controls the White House, Congress, and the Senate with at least one strong majority," said Clark.

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