Summer's over, but this may be the time to consider heading to Europe.
As the market moves into the 2013 home stretch, the strong performance of U.S. equities and mass exodus from bonds (and sting for those who let cash sit on the sidelines as they waited for the massive correction that hasn't come) positions European equities as a relative value portfolio option.
Financial advisors and market analysts don't expect investors to make major changes to allocations in the year's final quarter. However, they say, with considerable gains in U.S. stocks, rebalancing into the European recovery may be a wise bet.
Analysis of institutional investors' moves in the final quarter of the past few years shows that even with double-digit gains in U.S. stocks, big investors maintained their portfolio positions, according to Standard and Poor's. That is likely to be the case again, and it's a sound strategy for individual investors as well.
Howard Silverblatt, senior index analyst at S&P, said shareholders have sold out of profitable U.S. equity positions the past few years but did not reduce exposure to the U.S. market. Lacking a dominant risk issue this year—even if correction fears remain prevalent—Silverblatt expects a similar rebalancing approach as 2013 draws to a close.
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"I don't see people moving that much from current allocations than where they were in 2012 or 2011," Silverblatt said. "There's no excess return in bonds, and whatever you do in fixed income has to be shorter term—equities are still the best bang for your buck," he added.
Gary Thayer, chief macro strategist at Wells Fargo Advisors, doesn't expect a major shift in strategy, either. Overall, he said, investors seem less fearful than they have the past two years. "They are still cautious, but more positive than negative," he said.
Thayer expects investors to go further out on the risk horizon from here, moving from what was a balanced portfolio in recent years to a more growth-oriented approach as they continue to shed bonds. That trend, in addition to reallocation of gains from U.S. equities, should favor more international exposure in a typical portfolio.