TCA Financial has told clients still overweight US equities that future gains on their holdings are more dependent upon a continuation of the Fed’s indecision on interest rates than on conventional methods of price discovery.

“By most conventional methods of valuing stocks, US equities are overvalued and prone to correction. Any additional upside is almost entirely dependent upon the Federal Reserve being unable to raise interest rates further this year. That said, we think the consensus in the market is that the lack of direction we’ve seen from the US central bank will continue so we’re not advising them to head for the exits just yet,” said Colin Phipps, chief economist at TCA Financial.
The Fed last raised interest rates by 25 basis points in December 2015, the first increase in the fed funds rate for nearly a decade but, despite signaling the likelihood of three or four further rate hikes in 2016, it has failed to deliver on its guidance leaving investors to drive stocks and other risk assets higher in anticipation of an extended period of inertia.
TCA Financial says it has looked to emerging markets for more upside citing their relative cheapness compared to US stocks and the likelihood that an impotent Fed will continue to drive more funds into foreign stocks.
“It’s the classic double whammy. We simply believe the upside potential is greater in emerging markets than in advanced markets right now. Of course, they can be more volatile but we expect them to hold up well in the short to medium-term,” concluded Phipps.

About TCA Financial:
TCA Financial is resolutely committed to helping our clients accumulate and preserve wealth by actively managing the deployment of their investment capital within the global financial markets. We have a proven, checkable track record of being able to accomplish this regardless of the prevailing macro-economic conditions because of our expertise and professionalism and because we know that markets, just like people, are all connected to varying degrees at varying times.