Emerging Markets, Commodities are Best Plays for Cautious Market

Don't bet on a stock surge heading into the end of the year. And don't expect the Federal Reserve to hike rates anytime soon either, said Jose Rasco, chief investment strategist at HSBC Private Bank Americas. "Volatility, slow growth and policy divergence in central banks has us cautious heading into year-end," said Rasco. "That said, we still prefer U.S. equities, although we expect more volatility." In Rasco's view, the Federal Reserve will hike rates slowly, and any rate increases are driven by a longer term desire for normalization rather than fight still subdued current inflation pressures. In this environment, Rasco advises investors to remain defensive on equities and positive on income producing assets. He said his advisory model portfolio remains largely unchanged, with a somewhat defensive tilt, including a small overweight in cash and gold, and a small underweight in equities.