Institutional investors remain largely bullish on U.S. equities for 2015. However, stock exchange traded fund investors should still temper expectations as volatility could dampen returns.
According to a recent NEPC survey, 96% of institutional investors are bullish on equities for the year, with 54% of respondents pointing to a 6% to 10% return, reports Mark Melin for ValueWalk.
Specifically, 36% of institutional investors believe U.S. equities will outperform in 2015 while 13% said emerging market equities could outperform.
ETF investors also have a number of options to capture the two markets. For instance, investors can use the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA), SPDR S&P 500 ETF (NYSEArca: SPY) and PowerShares QQQ (NasdaqGM: QQQ), which tracks the Nasdaq-100, to track the major U.S. benchmarks.
For broad U.S. market exposure, the Vanguard Total Stock Market ETF (NYSEArca: VTI), Schwab U.S. Broad Market ETF (NYSEArca: SCHB) and iShares Core S&P Total US Stock Market ETF (NYSEArca: ITOT) essentially cover the entire U.S. stock market in a single investment option.
However, investors should temper their outlook. Michael Feroli, chief U.S. economist at JPMorgan Chase, downwardly revised estimates of U.S. economic growth, reports Peter Coy for Bloomberg.
“It is not hard to come up with reasons for the weakness in today’s report—sluggish foreign growth and a strong dollar are the obvious ones,” Feroli said in a note.
The iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) both provide exposure to the emerging markets. Additionally, for those who are wary about a currency risks, the iShares Currency Hedged MSCI Emerging Markets ETF (NYSEArca: HEEM) and the Deutsche X-trackers MSCI Emerging Markets Hedged Equity Fund (NYSEArca: DBEM) track developing markets while hedging against depreciating foreign currencies.
After the sudden flash crash in the Swiss franc and surge in the U.S. dollar, 81% of institutional investors say they don’t hedge currency risk and 71% have no plans to hedge Forex risks ahead.
On the other hand, institutional investors were least bullish on real estate and fixed-income assets, with emerging market debt coming in at last.
For more information on the equities market, visit our S&P 500 category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of EEM, SPY and QQQ.