In light of Fed Chairman Ben Bernanke's comments earlier this week, I have been thinking a bit about what it means for the U.S. and its markets. Wednesday's report given by "Big Ben" was nothing short of ominous and lethargic in my opinion.
As now the outlook has slowed to a growth rate of 2.5% per year and we are still seemingly light years away from unemployment being back down around 5%, investors need to start thinking about how to hedge their investments so as not to get bogged down and can still gain in a stagnant market. Emerging Markets offer a greater growth potential as these countries are still growing at an expected 10% a year.
The Fed resisted dumping another $600 billion into the market mimicking what they did last August. it shows that the U.S. has entered a time when the market needs to get back to standing as opposed to being propped up. While, this is the best thing we could hope for, (as no one wants a market propped up by anything other than the free hand) it is going to be painful and slow going for the next few years as the market regains its walking strength before it can run.
Investing in emerging markets will produce a hedge against the short term U.S. economic state. Look to China, Brazil, and India to lead this charge into the next few years. Many analysts have been coming out with rave reviews of Emerging Markets and the growth that they offer. It would be wise to follow suit as we go into the Q2 earnings reports. Keep an eye on VALE S.A., Asia Carbon Industries, and BioStar Pharmaceuticals. All three should have better than expected Q2 earnings and thus help drive the stock price up.
Buy these stocks now and see what happens when they report!