No baby bull
With the bull market now heading into its third year, investors need to ready themselves for the inevitable shift from growth stocks to value stocks, small-cap to large-cap, said Mark Hulbert in Market​Watch​.com. While it’s no surprise that small-​company and growth stocks led the bull market in its infancy, “it is increasingly surprising that they continue to do so.” Large-cap value has “never been more undervalued” relative to small-cap growth, according to GMO chief investment strategist Jeremy Grantham. When the shift does happen, however, it will be huge. One way to ride the maturing bull: Buy a large-cap value exchange-traded fund, such as iShares Morningstar Large Value Index fund. To take a bigger stand, go long on large value while “simultaneously shorting an equal dollar amount of the iShares Morningstar Small Growth Index fund.”
What’s in: Corporate bonds
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Reacting to turmoil in the Middle East, investors are suddenly pouring money into high-quality U.S. corporate bonds, said Jonnelle Marte in SmartMoney. So far this year, fund investors have plowed $400 million into this “sleepy part” of the bond universe, which is a “huge turnaround from the fourth quarter of last year, when investors yanked $300 million from these funds.” Though some investors are “surely chasing performance,” average yields on corporate bonds, recently 3.81 percent, are still far better than five-year Treasurys and other safe bonds. Plus, many “are still cheap, and it may take another 12 to 18 months before they become fairly valued.” Still, now isn’t the time to bet on individual bonds. Stick with bond funds, such as Loomis Sayles Investment Grade Bond Fund or T. Rowe Price New Income Fund.
Midwest land grab
What does the price of bread in Egypt have to do with the value of land in Iowa? asked Gillian Tett in the Financial Times. Quite a bit. The same forces behind turmoil in the Middle East—rising food prices—are fueling a real estate boom in the Midwest. In 2010, agricultural land prices in Iowa, Illinois, Michigan, Indiana, and Wisconsin jumped 12 percent, the second-highest increase in 30 years. And speculation that the “commodity bonanza” will continue is driving up prices in some areas even more.
