A: The energy and technology sectors are attractive. Underperforming emerging markets also offer value, and I see good long-term value in select markets such as Brazil, China and Korea. You can read more about which sectors and countries I like in my monthly Investment Directions commentary.
Q: Will emerging markets’ underperformance continue?
A: While I wouldn’t be surprised to see continued near-term challenges for emerging markets, I continue to like emerging market stocks over the long term. Although the stellar economic growth we saw in China and India in 2010 is not likely to be repeated, emerging markets growth should continue to outpace that of developed markets and current valuations provide some potentially attractive entry points.
Q: What are the opportunities now in fixed income?
A: In light of potential Fed tapering, I continue to prefer credit sectors over those more sensitive to interest rates (like Treasuries and TIPS). I also continue to like municipal bonds and believe that high yield still provides a better yield-to-risk payoff than many other fixed income alternatives.
Q: What is the outlook for gold?
A: While I still believe that investor portfolios should contain a strategic allocation to gold, changing monetary conditions provide for a less accommodating environment. All else being equal, gold returns are likely to be lower and more volatile than has been the case over the past four or five years.
Russ Koesterich is the iShares Global Chief Investment Strategist.