The US economy is under a steady recovery. It has been resilent despite the issues of US cliff. The US grew at 2 to 2.5% in the second quarter. They are now looking to grow at 3 to 3.5% in 2014. Vehicle Sales, Housing, Capital goods orders are all moving up in US. The economy is now more optimistic. The unemployment rates is currently at 7.5%. They are now targeting at 6.5% in a year.

Household networth has been increasing. Household networth is Household assets minus liabilities. There is now more support to the US economy.

The Fed’s indication of timing of QE tapering and unwinding has made some money flow from emerging markets move back to home. This has created volatility among most asset classes. Fed may announce tapering of QE as early as September 2013. Over the course of next 9 months the QE of 85b US will be reduced to zero.

Fed might tighten rates only in the end of 2014 or early 2015.

Bond yields in the US may raise by 2.5% over the next 1 year.

Higher bond yields in US does not necessarily mean or imply negative for Asian equities.

Investment implication:
Equities will perform well. Asian exports will improve. Asian equities China, India and Korea are incredibily cheap. Asian equities will perform well once there is more support coming from US.

Materials, Info Tech, Energy, Consumer Discretionary, Industrials in US equities will outperform.

If you are a growth investor, invest in US for the next 12 to 18 months.

If you are a value investor, then Indian equities currently offer the best value for the next 2-3 years.

What’s on your mind ? We recommended US Equities fund in early 2012. The fund has already given 20% return. Do check with us for the growth and value opportunities keeping in mind your asset allocation. Happy investing !

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