The US market rally is bound to fall but the question is what will bring it down?
New York fund selectors have pinned a potential US market correction on lower than expected earnings, over other factors such president Donald Trump’s social media shenanigans.
In a poll at Citywire’s 2017 New York event, 40% of selectors said earnings falling short could be the trigger to spark a market correction, while another 35% said it could be rising interest rates, and 15% pointed to the end of quantitative easing as a potential cause.
Only 10% said Trump’s unpredictable tweets could spark a market drop.
Turning to non-traditional investments, 48% of New York selectors said they had been backing real assets, 33% chose private equity and the rest voted for hedge funds.
Despite a meteoric rise in price, none of the selectors said they had backed cryptocurrencies.
Amid the sustained emerging markets bull run, 38% of selectors said they planned to increase their exposure to that asset class in the next six months.
European, North American and Asia Pacific equities were a tie among investors, each receiving the support of 14% of the selectors. Global and Latin American stocks each got the backing of 10% of participants.
Brazil, with 45% of the vote, ranked top in the selectors' list of Latin American countries that will outperform next year. Mexico came in as a close second with 36%, while Argentina lagged with 18% of the support.
None of the selectors said they expect crisis-riddled Venezuela to outperform, though its healthier neighbor, Colombia, didn’t receive support either.
Turning to fixed income, 30% of selectors chose US dollar bonds as the asset they'll increase their allocation to in the next six months, with global bonds coming in second with 25% of support.
High yield and emerging market bonds each received 15% of the votes. Only 10% of selectors picked corporate bonds as their choice, and European bonds came last with only 5% of support.