Despite a host of economic issues plaguing the developed world, investors continue to hope this is the year for equities.
This is due to reflationary monetary policy and improving fundamentals, says Patrick Bradley, a product specialist with the global fixed-income team at Brandywine Global Investment Management in Philadelphia.
His firm manages the Renaissance Global Bond Fund and he co-manages the Renaissance Optimal Income Portfolio.
Markets have also continued to rally in spite of concerns about the U.S. fiscal cliff, tension in the Middle East, and continued problems in the Eurozone.
Read: Eye on emerging markets
He adds these positive factors “give us the means to take some incremental risk in our portfolios. In fact, it’s possible we could experience stronger than expected growth. We’ve already seen strong appreciation in capital markets, [which] would suggest an underlying optimistic expectation.”
And the slow but sustained global growth will continue to provide investment opportunities in 2013. The geographies he finds reasonably compelling are the Americas, particularly the U.S., Canada and Mexico.
“Mexico was one of our solid ideas last year and we continue to like the underlying economic fundamentals, so we continue to have that exposure,” says Bradley.
Due to an inexpensive currency and easier monetary policies, the U.S. continues to maintain its dominance in his portfolio.
He says, “Expectation of a pick-up in [the U.S.] economic growth and some widening out in credit spreads among banks last year allowed us to increase that investment.”
In Latin America, Chile takes the top spot as a commodity currency country with tremendous growth prospects.
“We like the underlying budget and trade fundamentals [in Chile],” says Bradley. “The other Latin American country we have an exposure is Brazil [where] we expect to see demand for infrastructure investments and an increase in infrastructure spending.”
His reasoning: Since Brazil is the host of the next Olympics in 2016, it’s expected to see some building that might create a positive environment for investment.
“Even if their currency goes nowhere, we still hold [Brazilian] bonds with yield-to-maturities from 8% to 9%,” says Bradley. “So it remains an attractive country both from a yield perspective and from an economic expectation perspective.”