EM equities better value than US
Harman said after years of loose monetary policy and rising stock prices, equity valuations are no longer attractive in some developed markets.
High valuations reduce the prospect for returns and this is especially true for the S&P 500, he added.
“With major central banks tapering their asset purchase programmes, we expect higher volatility in financial markets as liquidity is withdrawn.”
Harman sees more opportunity in emerging market (EM) equities where valuations are more attractive.
“Should the US dollar continue to weaken, it would be supportive for EM investors who have been concerned over US dollar denominated debt,” he added. “EM equities are also under-owned by the global investment community, and while valuations are less attractive now after the rally in 2016, we see value in both commodity and manufacturing economies.”
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