Opinion

John Wasik

Take the long view and side-step investing in China

May 12, 2014 17:58 UTC

CHICAGO, May 12 (Reuters) – As the financial world casts its
eyes on the initial public offering of Chinese Internet company
Alibaba (IPO-ALIB.N: Quote, Profile, Research, Stock Buzz), likely the largest ever tech IPO, the
bigger picture of Chinese economic growth is in question.

Since most of China’s big export customers are showing
sluggish or no real growth this year, the world’s second-largest
economy may be taking a breather after nearly a generation of
expansion. Manufacturing in the People’s Republic showed a
fourth straight month of slowdown in April.

Despite myriad concerns about Chinese stock markets, real
estate and banking systems, the long view on China is still
bullish. For one, Neena Mishra, director of ETF research for
Zacks Investments in Chicago, sees a little slowing in China in
the near term. But, she notes, it’s “not likely China will see a
hard landing” akin to a meltdown given its $3.8 trillion foreign
exchange cash pile and growing middle class. She still sees some
relatively good values in Chinese stocks, and “wouldn’t be
surprised to see that market moving up.”

Lately, Chinese stocks have not reflected the long-range
growth optimism as global investors fear contraction. The
largest exchange-traded fund of major Chinese stocks , the
iShares China Large-Cap ETF, which holds half of its
portfolio in financial services and energy stocks, is down
nearly 10 percent year to date through March 9 and off about 7
percent for the past 12 months.

In the short term, you would be better off investing in a
broader portfolio of emerging markets stocks and reducing direct
exposure to China.

Don’t let Russia scare you from euro zone stocks

Apr 28, 2014 19:19 UTC

CHICAGO, April 28 (Reuters) – Although it’s easy to get
distracted by the turmoil in Ukraine, the trickle of economic
growth in Western Europe continues to boost euro zone stocks and
batter Russian companies. Multinational Western European stocks
should continue to be core holdings in your portfolio.

Things are looking rosier in the countries clobbered the
hardest by the 2008 credit meltdown. As of April 25, the Italy
FTSE MIB Index is up 13 percent this year, followed by a 12
percent gain in Portugal, almost 8 percent run-up in Ireland, a
5 percent increase in Greece and 4 percent recovery in Spain.

Among the negatives: Unemployment, deflation and tight
credit continue to be problems in these countries, even if they
are gaining ground on repairing their fractured banking systems.
Also, stock markets in The Netherlands and Germany are down
slightly this year (through April 25).

Column: Climate is right for clean energy firms

Apr 21, 2014 15:32 UTC

CHICAGO (Reuters) – If you’re ecology minded, the news hasn’t been all that green of late, with ice caps and glaciers melting and storms becoming more destructive. But there is a huge silver lining for long-term investors in environmentally-friendly companies and technologies.

To stave off a nearly 5-degree global temperature increase by 2100, nations must cut their global greenhouse emissions by up to 70 percent by the middle of this century, according to a recent report by the Intergovernmental Panel on Climate Change.

There’s little consensus among developed and emerging nations on how to effectively deal with climate change and reduce the amount of greenhouse gases, but there is agreement on one aspect of this global threat: Trillions of needed dollars will continue to pour into renewable and clean sources of energy, transportation, building and manufacturing.

Climate is right for clean energy firms

Apr 21, 2014 15:30 UTC

CHICAGO, April 21 (Reuters) – If you’re ecology minded, the
news hasn’t been all that green of late, with ice caps and
glaciers melting and storms becoming more destructive. But there
is a huge silver lining for long-term investors in
environmentally-friendly companies and technologies.

To stave off a nearly 5-degree global temperature increase
by 2100, nations must cut their global greenhouse emissions by
up to 70 percent by the middle of this century, according to a
recent report by the Intergovernmental Panel on Climate Change.

There’s little consensus among developed and emerging
nations on how to effectively deal with climate change and
reduce the amount of greenhouse gases, but there is agreement on
one aspect of this global threat: Trillions of needed dollars
will continue to pour into renewable and clean sources of
energy, transportation, building and manufacturing.

How to avoid the trouble coming to the tech sector

Apr 14, 2014 17:31 UTC

CHICAGO, April 14 (Reuters) – A resounding shot across the
bow has been fired at the tech sector in recent weeks. The
tech-heavy Nasdaq Composite Index is down nearly 5 percent in
April through Friday’s close and the Nasdaq Biotechnology Index
is off 21 percent from its record closing high on Feb. 25. Many
of the sector’s flagships and newcomers have been in the
crosshairs.

The latest tech stock falterings could be a sign of trouble
ahead.

To get a clearer idea of what’s roiling the tech sector, you
have to look at trends within various parts of it.

One item to look at is data storage, which is offered by
Amazon.com Inc and Google Inc and has been
the object of a price war of late. While falling prices in this
sub-sector are great for customers, they will eat into profits
for competing companies.

Smart shopping for mid-caps

Apr 7, 2014 19:48 UTC

CHICAGO, April 7 (Reuters) – Go for the most famous
companies when you are investing, and you are likely to pay the
highest price possible because most investors place a premium on
the biggest-name stocks. But take a look at the roughly 1,500
companies that make up the mid-cap market, and you could be
making a pretty solid investment this year.

Mid-caps, with market values between $1 billion and $15
billion, are often the least visible choices in investing. They
are big enough to have mature management teams, yet may not
carry the same downside risk as a mega-cap or a small company.
They may be able to grow more robustly than mega-caps because of
their size. And as market valuations have climbed for both mega-
and small caps, mid-caps offer returns that are right down the
middle of the plate.

The S&P MidCap 400 index returned 23.2 percent for
the 12 months through April 4 compared to 22 percent for the S&P
500 index of big stocks and 29 percent for the
small-company S&P 600 index.

Avoid losses on your bond funds by going unconventional

Mar 31, 2014 18:34 UTC

CHICAGO (Reuters) – As the financial markets await more signals on the Federal Reserve’s interest-rate policy next year, which may push rates higher in early 2015, it wouldn’t hurt to take a close look at alternative bond funds.

Unlike conventional bond index funds, which may hold static portfolios, “unconstrained” or “hedged” funds are able to be nimble when rates rise. Although they may not totally avoid losses that could come with rising rates, they could avoid some of the volatility. Ten bond dealers out of 17 polled by Reuters see the Fed raising rates in the second half of 2015, with another four saying increases would not start until 2016.

Last Friday, Charles Evans, president of the Federal Reserve Bank of Chicago, said eventual rate hikes would likely follow a “shallower path of increases.”

Watching the weather on Wall Street

Mar 24, 2014 18:16 UTC

CHICAGO (Reuters) – With the warming of spring, there’s a natural tendency to think that stocks might warm up as well, despite less-than-sunny outlooks on interest rates from the Federal Reserve.

There is a documented weather pattern to Wall Street, which market watchers use as another indicator in their play books. But in this year of endless winter storms, the patterns have already been stood on their heads.

In positive years for stocks, January has typically seen rallies while February falters. Not so in 2014. The S&P 500 index dropped 3.5 percent in January, followed by a 4 percent rebound last month.

After the Fed: What investors should do now

Mar 20, 2014 19:59 UTC

CHICAGO, March 20 (Reuters) – For active income investors,
the next year or so will be a trying time of tough love. While
yields are rising, which depresses prices of most
income-oriented securities, this presents other opportunities.

On Wednesday, Federal Reserve Chairman Janet Yellen signaled
that interest rates may rise as early as next spring, and the
market reacted with force, continuing a pullback that began
nearly a year ago.

Some unheralded optimism lies behind Yellen’s comments that
the Fed will end its bond-buying stimulus program this fall and
probably raise short-term interest rates in the spring of 2015.
That bodes well for a number of sectors which benefit from
slowly rising rates and consumer spending.

Drop the S&P index fund for asset-class investing

Mar 17, 2014 15:59 UTC

CHICAGO (Reuters) – You can get most of what you want for your investments from off-the-shelf index funds, but you may have to dig deeper to make your portfolio more productive.

For most mainstream investors, a focus on S&P 500 index funds and a general bond market index serves them well. Yet what if you concentrated on a mixture of different asset classes instead of only picking the usual suspects in conventional index funds that hold the most popular stocks and bonds? You may be able to boost returns while insulating yourself from off years.

An “asset-class investing” approach still relies upon low-cost, passively managed funds as core vehicles, but it puts a greater focus on diversification, which could enhance returns. Giving yourself a piece of every corner of the market means investing in large-, medium- and small-sized companies in developed and emerging markets, plus a broad selection of U.S. and global bonds.

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