In an environment of expensive valuations, absolute bargains are hard to come by. Russ Koesterich discusses why investors should focus on relative value and offers three areas where investors can find it.
Well, this is the big challenge right now. Nothing is cheap. And what I've come to say recently is that reasonable is the new cheap. In other words, you're not going to find an absolute bargain, but you do find some relative bargains. In that context, there are a couple of places we do think investors should be looking.
One, emerging markets, specifically in Asia. These are generally reasonable. We're seeing improving economic conditions; we're seeing some positive catalysts from recent elections, and also investor sentiment starting to turn. Second, Japanese equities.
Third, closer to home, we see better bargains in large cap cyclical companies in the United States, which appear not only cheaper than smaller-cap and more defensive companies, but also should be the biggest beneficiaries as we continue to see some improvement in the U.S. economy.
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