Financial advisors are showing a greater preference for global equities over domestic stocks, citing more attractive valuations and a strong U.S. dollar.
Europe and Japan remain particularly popular with many advisors, according to our monthly barometer of where wealth managers are allocating assets on behalf of clients.
The Global Asset Allocation Tracker found that advisors continue to increase allocations to equities while holding back on bonds. Wealth managers say they are holding back in anticipation the Fed will raise rates later this year.
In moving more client assets into global equities, many advisors pointed to a weak euro and yen as good reasons to invest more in those countries. Others noted the lower valuations for equities compared with U.S. markets.
Pointing to exchange rates, one planner says that “exports can improve and be more competitive, at least in the short term.” Another wealth manager, bullish on Europe and Japan, worried about potential drawbacks in “China’s red hot stock market.”
One advisor, however, isn’t writing off all non-developed countries. “Emerging markets have strong long-term fundamentals, just some short-term issues.”
Advisors also say that they’ve been managing client expectations in regard to searching for better yields, and reminding clients of their risk standards if they chase returns. The tracker surveyed 292 advisors, using a baseline of 50. Readings of more than 50 indicate increases and less than 50 indicate declines.