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Opportunities exist despite market uncertainty, says BNY Mellon Wealth Management


Despite the persisting European debt crisis, slowing growth in China, the coming US elections and other factors, investors who are able to look past the latest headlines and focus on the long term will be rewarded over time, according to a recent report from BNY Mellon Wealth Management.

"Investors can’t afford to be paralysed by turbulence and uncertainty in the global markets," says Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. "In this critical decade, investors need to be nimble to actively uncover investing opportunities rooted in solid fundamentals."

The wealth manager’s Summer 2012 Investment Insights discusses the benefits of disciplined investing and avoiding moves in and out of the market in reaction to news of the day.

"Unfortunately investors who backed out of the equity market after the third quarter swoon in 2011, missed out on strong gains we saw through the end of March this year," Grohowski says.

The paper outlines three key areas of potential opportunity:

Fixed income: BNY Mellon Wealth Management is underweight Treasuries and believes investors can find better income sources by diversifying across fixed income sectors, including investment grade corporate, municipal, emerging market and high-yield bonds. For tax-sensitive investors we believe high quality munis are still attractive relative to Treasuries, especially on an after-tax basis.

Equities: While fundamentals remain strong in this class, we expect current global conditions to heighten uncertainty over the next few quarters. US corporations continue to provide strength to the recovery, while we continue to be overweight in emerging market equities, despite possible short-term pull back because of turmoil in Europe. BNY Mellon Wealth Management says developing markets offer the potential for long-term growth and attractive valuations, which is why we prefer them to developed international markets.

Diversifiers: Lower-correlated strategies can offer ways to help reduce risk amid uncertainty and smooth portfolio volatility. The firm sees potential opportunities in long/short hedge funds, macro-driven funds and private equity investments that can add value to portfolios owned by appropriate investors over the long term.

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