Market Viewpoints
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"Despite a voluminous and often fervent literature on “income distribution,” the cold fact is that most income is not distributed: It is earned."
Despite a few “tricks”- tapering, an Emerging Market sell-off, and a US government shutdown, 2013 has largely been a “treat” for risk-taking investors. Inflows into equity mutual funds/ETFs in October were the third-largest on record. On the other hand, Bond funds have posted five consecutive monthly outflows, for the first time since 2003. You will recall my year-end target on the S&P 500 (SPX) is 1744 and this was obliterated two weeks ago amid the euphoria of a deal in the US Congress to avert a US default and an end of the US government shutdown. I am not tempted to raise my year-end target as I see very little upside from here. I would recommend you lock in your profits and look for more incomeyielding strategies until the end of the year. I am however by no means bearish, and have a very constructive outlook for 2014. US inflation continues to come in on the soft side. Europe encountered its own scare of deflation with new data showing inflation well below the European Central Bank (ECB) target. The most anticipated political event of the year – the third plenum of China’s ruling Communist party is set to take place this weekend. Recall, it was at the third plenum in 1978 that Deng Xiaoping announced the opening up of the Chinese economy: The move that triggered three decades of phenomenal growth.