Wall Street: Here are the 2 best places to invest

Published Fri, Jul 8 201610:51 AM EDT

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

In the global search for returns after the Brexit vote, many analysts see the U.S. stock market as the best place to put money to work. Emerging markets are also relatively attractive with the Fed on hold. "The U.S. is still the engine of growth, or place of greatest certainty," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. An informal survey of participants at the 2016 UBS CIO Global Forum on June 30 showed 51 percent expect U.S. equities to show the best equity return this year. Emerging markets came in second, with 39 percent of the votes. Last year, the majority of respondents expected euro zone equities to have the best returns. Devan Kaloo, head of global emerging markets at Aberdeen Asset Management, said at the UBS forum that most people mistakenly continue to see political risk as the greatest concern for emerging markets. "Political risk today is in the West," he said. "Political risk today is the rise of populism. Event risk is coming back to us (in a way) that we haven't seen since 2008." Populist support tipped the United Kingdom to vote to leave the European Union in last month's referendum. Now many analysts expect the U.K. to fall into recession and pressure the fragile euro zone as a Brexit raises questions about whether other EU members will leave. Those tensions have a lesser effect on the U.S. economy and little on emerging markets even as the global wave of populism has helped Donald Trump become the presumptive Republican nominee for president. "While we may have Trump in the U.S., the economy is in much better shape," said Susanne Alexandor, vice president, investment team, Cougar Global Investments. The firm shifted to a completely U.S.-focused portfolio in February. "Emerging markets have gone through their bear market already … and the lack of rate hikes from the Fed is actually bullish, takes a lot of pressure off them," said Peter Boockvar, chief market analyst at The Lindsey Group. "I'm much less worried about emerging markets and think they'll actually outperform global markets," he said, citing political changes such as a crackdown on corruption in Brazil. Emerging markets are also transforming their economies away from commodities-heavy industries. "I think what you've got in China and (ex-) China is a big chunk of EM, you've got this big move towards tech and telecom that you don't have in the U.K .or Europe," said Clem Miller, investment strategist and portfolio manager at Wilmington Trust Investment Advisors." You did have it in the U.S. but it's becoming a lot more dynamic in EM." Financials and information technology are the top-weighted sectors in the MSCI Emerging Markets Index, and telecoms has the sixth-greatest weight. Telecoms have the smallest weighting in the MSCI North American Index and come third to last in the MSCI Europe Index. To be sure, analysts generally said that in an era of slow global growth overall, U.S. and emerging market equities are attractive only relative to other markets and fixed income. The Brexit-related rush into the safe haven of bond markets this week pushed benchmark global yields to record lows, including negative territory. Meanwhile, the S & P 500 is more than 3 percent higher for the year so far and the iShares MSCI Emerging Markets ETF (EEM) is up more than 6 percent year to date. In contrast, the German DAX is more than 10 percent lower year to date and the Nikkei 225 has fallen 20 percent. As investors await the outcome of a Brexit, Cougar's Alexandor said, "Equities, particularly in the U.S., are going to be supported and less volatile than other areas in the world, but we're watching the U.S. dollar because that could adversely affect the U.S. economy."

Michael Nagle | Bloomberg | Getty Images

"The U.S. is still the engine of growth, or place of greatest certainty," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

An informal survey of participants at the 2016 UBS CIO Global Forum on June 30 showed 51 percent expect U.S. equities to show the best equity return this year. Emerging markets came in second, with 39 percent of the votes.