- Equities across the regions appear poised to benefit from positive earnings forecasts
- German equities will benefit from their exposure to the improving global economy
- Australian stocks appear to offer higher dividends and lower volatility than other markets
- The firm is negative on Latin America
German and Australian stocks are among the more attractive equities singled out in the Mellon Capital Management Corporation Investment Perspective for Winter 2014. Equities across the regions appear poised to benefit from positive earnings forecasts and attractive valuations, the report said.
"We see moderate overall growth for the global economy, with positive momentum in the U.S. and Europe, which is similar to the projections we made in the third quarter of 2013," said Jeff Zhang, executive vice president and chief investment officer for Mellon Capital. "We did see slight easing in leading economic indicators for both Japan and the UK."
Among developed markets, Mellon Capital believes German equities are positioned to benefit from their exposure to the improving global economy, particularly as demand for autos increases in the U.S. and emerging markets. In addition to attractive valuations, Australian stocks also appear to offer higher dividends and lower volatility than in many other markets, Mellon Capital said.
In Asia, Mellon Capital said it is positive on Korean equities as they are supported by strong earnings forecasts and a potential pickup in exports if the developed market economies recover in 2014 as the consensus is expecting.
Mellon Capital said it is negative on Latin America. In Brazil, government policies could create market volatility prior to the October election; and Mexico appears hampered by a slow recovery and high valuations, the report said.
In the U.S., Mellon Capital said it expects a moderate-growth environment that could create investment opportunities in information technology and energy.
Mellon Capital said it continues to favor stocks over bonds due to a combination of reduced macro uncertainty, a benign backdrop for earnings growth, and a potential increase in term premia as the Federal Reserve tapers its bond purchase plan.