Jeff believes that oil is likely to drop further, and he sees no reason why oil cannot trade back down to $15–$20.
Consequently, Jeff likes oil-importing countries such as South Korea, which he sees as being one of three most sensitive to oil prices, along with Germany and Japan.
Global Asset Allocation
From a fixed income perspective, Jeff’s team at BMO is hugging the short end of the yield curve and has been trading off interest rate risk in exchange for credit risk through quasi-equity securities such as REITs, bank loans, high yields, etc. In the emerging market debt space, he feels that countries that have a large portion of their debt denominated in U.S. dollars are at the greatest risk especially if the dollar continues to rally.
Jeff’s team is constructive on global equities and is over-weight in both international and emerging market equities. It is, however, tougher to make a valuation case for U.S. equities. As rates start to rise in the U.S., he believes that most bond-like sectors, or yielders, will be adversely impacted. In the EM space, more pleasant surprises from the central bank of China PBoC will inevitably propel EM equities higher.
For more research on South Korea, read our Market Insight South Korea at a Crossroads.
Read the Conversations with Professor Siegel Series here.
1Source: IMF GDP, 2014.
2Source: Bloomberg form October 2011 – April 2015.
Important Risks Related to this Article
Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments.
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