2011 was the year of market uncertainty. Investors flocked to safe haven investments like gold, U.S. treasuries and the U.S. Dollar as volatility rocked global markets and the European sovereign debt crisis unnerved investors who dumped stocks and jumped ship. Quite frankly, 2011 left a sour taste in many investors' mouths, and most are more than happy to bid good riddance to another dissatisfying year of little or negative returns.
Josh Brown, a vice president at Fusion IQ and author of the Reformed Broker blog, shared what he thinks will be the big investing themes of 2012 with The Daily Ticker's Aaron Task.
#1: Return of Emerging Markets
Brown says that despite a lackluster 2011, investors will return to emerging markets in full force next year as Europe and the U.S. offer little growth and opportunity. The BRIC (Brazil, Russia, India and China) countries got crushed in 2011, with their major indices falling 20 percent or more.
"People have been wiped out of these stocks," said Brown but "they can make a comeback in 2012." Investors can no longer blindly put their money in an emerging markets basket, such as the iShares MSCI Emerging Markets Index (EEM), Brown said, but instead must choose these markets with a discerning eye.
"A BRICs concept will be put on ice…and probably won't work…so investors need to focus at the country level" like Taiwan or Korea, Brown said. Emerging markets are "susceptible" to the problems in Europe but the continuation of interest rate easing in Brazil, China and India will lead to more growth and increased foreign investment.
#2: Actively Managed ETFs
Brown said the proliferation of ETFs will continue again next year as more top-rated mutual fund managers move into the ETF space. "ETFs will be the new wrapper of choice in 2012," Brown said. ETFs attracted the majority of investor cash in 2011 pulling in at least $5 billion in net inflows, according to data compiled by Strategic Insight. Bond ETFs proved to be the most popular among retail investors. Brown said ETFs will become less expensive and easier to buy in 2012 and investors will also have the option of picking a particular manager or strategy.
#3: Income Worship
Investors desperate for yield returned to old favorites like Microsoft and IBM this year and the appeal of stable, safe dividend plays wont' stop in 2012, Brown said. The risk-off trade will continue to lose steam with investors as the outlook in Europe and the U.S. remains murky.