Investment specialists predict a better year for equity markets in 2002, with stocks expected to outperform bonds and other competing investments. Alternative investment strategies are also a popular choice for the year ahead.
Investors should stay fully invested in equity markets, given the prevailing conditions, according to Sandra Lee, head of brand development and strategic planning at J F Funds.
'We very much prefer equities over bonds and cash,' she says. 'We believe equities offer much better value and upside potential than bonds. But having said that, it's always worth having a portion of quality bonds in your portfolio for diversification.
'We believe the equity market correction is almost over, and we expect a recovery in the US economy in the second half. Valuations have come down substantially. And there's still a lot of liquidity. As we saw in the last quarter, liquidity can drive up markets very quickly, even on very thin positive news flow. People are holding a lot of cash and looking for a home for it.'
A sustained rebound in US markets depended on the recovery of consumer confidence, employment levels, and corporate earning levels, Ms Lee says. 'As far as where to invest in equities, we believe Asia is a good place to be. Asian equity markets are now priced at about 14 times earnings, whereas the US and Europe are priced at about 20 to 30 times. So Asia is very cheap, and economic recovery in the US and Europe will benefit Asia as the manufacturing base.'
David Chapman, senior portfolio manager with financial advisory firm Towry Law, says equities seem a better bet for 2002 than bonds, but alternative investments such as hedge funds offer even brighter prospects.
