Investment experts are warning that the easy money has already been made in emerging markets and Eurozone bonds and that investors should look elsewhere for good returns.
Funds specialising in both have easily been the most popular sellers with British investors this year, but the time has come to look for alternatives, say the experts.
The least popular funds are invested in Asia and Japan.
Bryn Jones of investment firm Basil Rathbone is especially critical of emerging markets and the Eurozone.
“The short-term rise in value has already been seen in emerging markets,” he said. “I think the Eurozone has profited from investors moving into periphery nations rather than the main drivers of the single currency economy and the time to join them has passed.”
Lack of interest in US stocks
However, an investor sentiment survey from Lloyds Bank notes emerging markets have risen despite dropping back earlier in the year, indicating investors may have more confidence in what the markets have to offer long-term.
The Lloyds study also notes a lack of interest in US companies and a slowing appetite for UK property despite large increases in value.
Ashish Misra, Head of Investment Policy at Lloyds Bank Private Banking, said: “Our experience would be investors are keen on emerging market shares and there is a lot of anecdotal evidence that investors are seeking to go into emerging market exchange traded funds.”
Meanwhile, Russ Koesterich, BlackRock’s Global Chief Investment Strategist reckons investors are shifting focus away from equities and into bonds.
Research by the firm suggests $9 billion of stocks and shares were sold on Wall Street recently, with big brand corporates like Twitter seeing huge amounts wiped off their values. At one point, he points out; Twitter was 18% down, while Tesla Motors has plunged by around a third since February 2014.
Investors drop shares for bonds
But as the markets ebb, Koesterich explains investors are moving into fixed income bonds.
“Money is flooding into bonds, and the inflow is so high that the prices are being pushed down,” he said. “It doesn’t seem down to one single factor. The markets don’t seem to be paying any attention to the crisis between Russia and the Ukraine, while the Fed is making noises that are keeping mortgages and house prices low.”
Lastly, Azad Zangana, European Economist with Schroders feels poor growth in the Eurozone is not helping equity prices.
GDP has risen just 0.2% since the last quarter, just half of the expected figures.
France, Italy and the Netherlands all disappointed despite continuing with austerity budgets,” he said. “Germany was marginally better than expected, but overall the Eurozone was a let-down for investors.”
