In this day and age, uncertainty can be a precursor for panic. During the second quarter, the bond money market funds saw outflows while domestic equities saw inflows. When the fed annouced tapering of QE toward the end of the quarter, bond investors headed for the hills, and equity investors decreased some of their risk appetite. Sectors such as IT, Materials, and Utilities suffered in the broad market index, while the consumer sectors and healthcare continued their strong performance. Financials finally saw some light within the domestic market. Growth investments saw some movement versus Value investments due to a more positive viewpoint of the market, and investors more willing to bear risk.
Internationally the same issues still exist, but now China is having growth revised down due to the possibility of a over inflated real estate bubble, and the government is forcing the banks to solve this issue. Japan has seen good returns since the start of their QE program, but the question remains if wealth will trickle down to consumers in the form of increased of increased wages (wealth effect).
The popular thought is: "Will we see a claw back that has occurred during the past two years?" If economic news continues to be positive, then it should continue within the domestic market. If not, then a conservative stance should be taken. With housing coming back, this has improved personal balance sheets which has been positive toward fueling growth, but it needs to have more first time homeowners participating and not investment firms. 2014 will be a difficult environment with uncertainty of political/policy changes in the EU. Across the board there will be low growth across the developed region as long as the company and personal balance sheets remain over leveraged.
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