Time to Look at Where to Invest

The first worry on the mind of most investors are whether we will deep back into another short recession before recovering again. From the looks of things, the possibility of it happen seems to be getting slimmer. Good news from all side. Exports from developing countries and our part of the world is up again. It looks like consumption is starting to recover around the world.

The job market in US has stabilized with no signs of worsening. There is minimal inflation in US so it seems like the interest rates will still be kept low for a while. However, my guess is that the Fed is getting increasingly hawkish, meaning they will raise interest rates as soon as inflation starts kicking in, which will be a terrible news for all the bond holders. The eastern part of the world is starting to see inflation creeping back with China leading the pack. Interest rates are starting to be adjusted upwards and government policies are tightening to ward off possible bubbles in the near futures. US is probably at the turning point towards full recovering Asia seems to be a step in front of US for now. Europe remains stagnant with various political and social issues hindering their progress. The US dollar has stopped rising for the moment and has been stagnant for the last few months. Based on technical analysis, this may be the peak for the US dollar for now and it will start and continue its fall in the near future. Therefore gold looks extremely attractive right now.

My recommendations:

1) Its time to get out of bonds as rising interest rates will affect its return and move more aggressively into equity. My favorite region will still be asia and Indonesia looks like a good bet for now with its politics and economy returning to stability. However, Indonesia funds are not for the faint hearted so indicate to me if you wish to look deeper into it.

2) US dollar set to fall. Commodities and commodity currencies (AUS, NZ) will look interesting and the returns should be interesting

3) Emerging market and high yield bonds (High risk bonds) will probably give good returns. However, the bond and credit market remains risky after the financial crisis with incidents like Greece will pop up now and there and give investors a rollercoaster ride. So, I prefer equities for now.

4) International property funds and REITS will still underperform as most of the allocation are into US and Europe. The market still need some time to digest the extra property oversupply over the last decade.

So my overall portfolio will be 60-70% in equities and 40-30% in gold or commodities with none in cash or bonds. This is a very aggressive portfolio and you will see swings when incidents like Greece debt problem occurs but in the longer run of 5 years, the portfolio will definitely benefit you.