Given that the emerging markets, sovereign debt and commodities have been the chief beneficiaries of quantitative easing, we remain cautious on these pro Q.E sectors. While stocks have certainly benefited in the developed world from such monetary largesse, a combination of compelling valuations, dividend growth and safe balance sheets, make equities in the developed world a reasonable option to consider in a volatile investment climate.
While the U.S has its host of problems, the U.S for the time being appears to remain the best house in a bad neighbourhood. Despite the 1st half rally, there are many U.S stocks that offer a combination of solid earnings earnings and dividend growth that are valued at a reasonable price.
May was a pivotal month as it showed for the first time in many years that investors can indeed lose money in so called "risk free" bonds. This event was followed by substantial bond outflows in the month of June. That money has to end its way somewhere and we suspect that blue chip U.S stocks may be the chief beneficiary of such outflows from bonds.
OtterWood Capital Management's Q3 2013 Observations