The new year has just begun, but analysts are already forecasting a period of higher market volatility in 2015. Ed Easterling of Crestmont Research graphs the present situation and shows what investors can expect in the coming months. At the same time, Research Affiliates advises investors to use the structural “building blocks” approach to better anticipate real returns. And, with a new year taking hold, U.S. stocks are not performing as well. Russ Koesterich of BlackRock believes it’s a case of rising expectations. He explains how you can shield your portfolio from the effects of the current valuations.
Volatility In Perspective- The historical perspective of volatility shows that periods of higher volatility are normal and can extend for quarters or years. Ed Easterling of Crestmont Research shows that, as we have seen numerous times in the past six decades, extremely low volatility periods are often followed by surges in volatility.
Research Affiliates 10 Year Expected Returns– In a world of low bond yields and slow economic growth, historically realized 5-6% real (7-8% nominal) asset class returns may be unrealistic expectations. Using a structural “building blocks” approach, Research Affiliates forecasts 10 year real returns.
How U.S. Stocks Lost Their Lead– U.S. shares are now performing worse than the rest of the world. The problem is simply that both expectations and valuations are particularly high for U.S. stocks. U.S. economic fundamentals appear solid, but U.S. equities are trading at a significant premium over other developed and emerging markets. All of this underscores one of the basics of investing: Be diversified, and that means casting your net outside the U.S. as well
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