Wells Fargo Says To Avoid This Investment and Buy US Stocks Instead — Should You Invest?
In a recent note to investors, Wells Fargo analysts mentioned that they recommended avoiding emerging market equities right now.
Trending Now:
Read Next:
Since the massive bank holds a weighty opinion, it's worth digging into their suggestion. GOBankingRates unpacks Wells Fargo's recommendation and what that means for your portfolio.
Investing in emerging markets allows investors to diversify their portfolio beyond U.S. stocks. While you can target specific emerging markets, like India or Indonesia, opting to purchase an index fund focused on a broad swath of emerging markets can give you some exposure across multiple economies with minimal effort on your part.
For example, the MSCI Emerging Markets index offers a popular way for U.S.-based investors to add exposure to emerging markets to their portfolio. In the last year, the MSCI Emerging Market Index saw a net return of 13.04%, which is significantly higher than the S&P 500, which saw a slight decline.
While you might think that the outperformance of the MSCI Emerging Market Index over the S&P 500 would warrant investing more heavily in emerging markets, the opposite is true in Wells Fargo's opinion. Since the MSCI Emerging Market Index did so well in the last year, the analysts recognize that many investors who had invested in emerging markets will have seen their portfolio's composition change over the last year, with perhaps more weight in emerging markets than they would like.
Explore More:
The possible portfolio imbalance, with too much money invested in emerging markets and not enough in U.S. stocks, could represent a problem for some investors. Additionally, Wells Fargo remains unconvinced it's a good idea to stay so heavily weighted in favor of emerging markets.
The note pointed to the structural risks of emerging markets, including 'political and economic instability, corporate governance concerns, variable regulatory risks, as well as China's excessive debt, slumping property sector, and slowing growth.'
All of this to say, Wells Fargo's note encouraged investors to rebalance their portfolios more heavily toward U.S. stocks instead of emerging markets.
In the statement, Wells Fargo said, 'we favor reallocating to U.S. Large Cap, U.S. Mid Cap, or Developed Market (DM) ex-U.S. Equities to maintain overall equity exposure.'
Investors heavily weighted toward emerging markets might sell off some of those investments in order to purchase U.S. stocks. For example, you might sell some of your stake in the MSCI Emerging Markets index in order to buy more in a fund tied to the S&P 500.
If building and managing your own investment portfolio, the right strategy varies based on your interests, skill level and time commitment. For investors with significant time and the patience to monitor the constant turns of the stock market, actively managing it could be a good idea.
But if you are looking for a more hands-off approach with a long-term vision in mind, consider buying and holding low-cost index funds. As you buy and hold index funds for the long term, you can make big-picture changes to your portfolio, like adjusting toward or away from emerging markets occasionally. But, in general, you'll allow the investments to hopefully grow in value over the long term.
Wells Fargo is suggesting that investors shift away from emerging markets toward U.S. stocks. For some investors, the shift could make sense. For others, following through on this change wouldn't align with their investment goals. Take the time to decide what's best for your situation before making any changes to your portfolio.
More From GOBankingRates
10 Cars That Outlast the Average Vehicle
This article originally appeared on GOBankingRates.com: Wells Fargo Says To Avoid This Investment and Buy US Stocks Instead — Should You Invest?
Inicia sesión para acceder a tu portafolio
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
21 minutes ago
- Yahoo
Delta Air Lines' Q2 2025 Earnings: What to Expect
Atlanta, Georgia-based Delta Air Lines, Inc. (DAL) provides scheduled air transportation for passengers and cargo. With a market cap of $31.5 billion, the global airline leader offers flight status information, bookings, baggage handling, and other related services. The global airline leader is expected to announce its fiscal second-quarter earnings for 2025 before the market opens on Thursday, Jul. 10. Ahead of the event, analysts expect DAL to report a profit of $1.92 per share on a diluted basis, down 18.6% from $2.36 per share in the year-ago quarter. The company beat the consensus estimates in two of the last four quarters while missing the forecast on two other occasions. Dear Nvidia Stock Fans, Watch This Event Today Closely Can Broadcom Stock Hit $400 in 2025? A $2 Billion Reason to Sell Super Micro Computer Stock Now Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. For the full year, analysts expect DAL to report EPS of $5.08, down 17.5% from $6.16 in fiscal 2024. However, its EPS is expected to rise 28.7% year over year to $6.54 in fiscal 2026. DAL stock has underperformed the S&P 500 Index's ($SPX) 12.1% gains over the past 52 weeks, with shares up 1.6% during this period. Similarly, it underperformed the Industrial Select Sector SPDR Fund's (XLI) 19.4% gains over the same time frame. Delta's performance has been hindered by economic uncertainty and trade conflicts, which have dampened the travel market. As a result, the airline is scaling back its capacity growth plans to match supply with weaker demand. On Apr. 9, DAL shares closed up more than 23% after reporting its Q1 results. Its adjusted EPS of $0.46 surpassed Wall Street expectations of $0.40. The company's revenue was $14 billion, exceeding Wall Street forecasts of $13.8 billion. DAL expects Q2 adjusted EPS in the range of $1.70 to $2.30. Analysts' consensus opinion on DAL stock is bullish, with a 'Strong Buy' rating overall. Out of 21 analysts covering the stock, 19 advise a 'Strong Buy' rating, and two give a 'Hold.' DAL's average analyst price target is $61.91, indicating a potential upside of 26.4% from the current levels. On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
36 minutes ago
- Yahoo
Cyngn announces $17M registered direct offering
Cyngn (CYN) announced that it has entered into definitive agreements in a registered direct offering with a single institutional investor for the purchase and sale of approximately $17.2M of shares of Common Stock and pre-funded warrants at a price of $7.50 per share of Common Stock. Upon closing of the offering, the company will have fully utilized its shelf registration statement. Aggregate gross proceeds to the Company are expected to be approximately $17.2 million. The transaction is expected to close on or about June 30, 2025, subject to the satisfaction of customary closing conditions. The company expects to use the net proceeds from the offering for general corporate purposes and working capital. Aegis Capital Corp. is acting as exclusive placement agent for the offering. Sichenzia Ross Ference Carmel LLP is acting as counsel to the Company. Kaufman & Canoles, P.C. is acting as counsel to Aegis Capital Corp. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter Published first on TheFly – the ultimate source for real-time, market-moving breaking financial news. Try Now>> See the top stocks recommended by analysts >> Read More on CYN: Disclaimer & DisclosureReport an Issue Cyngn Stock (CYN) Rockets 165% on Nvidia Collaboration Morning News Wrap-Up: Thursday's Biggest Stock Market Stories! Cyngn announces $15M registered direct offering Cyngn trading resumes Cyngn trading halted, volatility trading pause
Forbes
40 minutes ago
- Forbes
Trade-War Volatility: Friend Or Foe For Retail Investors?
The front page of the Brooklyn Daily Eagle newspaper with the headline 'Wall St. In Panic As Stocks ... More Crash', published on the day of the initial Wall Street Crash of 'Black Thursday', 24th October 1929. (Photo by FPG/) Earlier this year, the trade war wreaked havoc on investors' portfolios. That's particularly true in early April as volatility soared and the S&P 500 teetered toward a bear market. But by the end of the second quarter, the index had found its way back to fresh all-time highs. With heavy volatility sending shockwaves through the stock market, investors aired their (obvious) grievances on how the US's approach to global trade policy has impacted markets. But was it actually…a good thing? The immediate answer is a resounding 'no' — and that response is even louder if the trade war were to send inflation shooting higher and push the global economy into a recession. And to be clear, some of that risk is still present. However, it may be worth exploring whether these types of events are actually good for the everyday investor. Volatility Can Bode Well For Retail Investors Let's not sidestep the reality, which is that volatility makes for very difficult investing environments. Even for investors who make routine, automated purchases in index funds, it can be difficult to embrace a scenario where 20% (or more) of your equity investment evaporates in the span of a few weeks. Throw in the reality that bonds have done little to soften the blow this time around, and the traditional investor in US stocks and bonds didn't have a great start to the year. Yet, those who stayed the course were ultimately rewarded. The S&P 500's annual returns since 1942 Whether it was active investors aggressively buying the dip — from our vantage point, eToro US clients logged their highest number of 'equity buy orders' in over a year on April 7th, the day the S&P 500 bottomed — or steadfast long-term investors sticking to their dollar-cost averaging strategy, those who bought the dip should be pleased. As Q2 draws to a close, their portfolios likely look much stronger than they did at the end of Q1. Volatility is a measure of emotion. But despite the fear and anxiety that comes alongside high-volatility environments, retail investors are learning that sometimes they need to close their eyes, buy, and hold. That's as long-term returns favor time in the market. Sometimes the rebound takes longer than anticipated. Other times — like now — the rally is quite fast. But at the end of the day, leaning into volatility is often a better strategy than panicking from it. A Reminder on Diversification As I write this, we're approaching the halfway mark of the year and the S&P 500 is barely above water. Yet gold prices are up almost 25% this year and 40% over the past 12 months. Bitcoin is up 14% and 74% in the same stretch, respectively. European equities are doing well this year too, with the German DAX up 20% and the UK's FTSE up 7.5%. Chinese stocks — like the FXI ETF — are up considerably this year, too. We're seeing strength across the board, except in the one asset that has become the most popular investment in town — US stocks. A look at the performance for various assets YTD 2025 and over the past 12 months. If the first half of 2025 served up any sort of reminders, it's that volatility can flare up in a hurry — to illustrate, the S&P 500 fell roughly 20% in about six weeks — and that diversification can help steady the ship when we see those volatility spikes. For example, take gold. Not only is gold considered a 'safe haven' asset, but it has actually performed quite well down the stretch. It's outperformed the S&P 500 in three of the last five years and in four of the last seven years. Short of a massive second-half reversal, it will likely outperform US stocks again in 2025. The Bottom Line on Volatility Let's be clear: The trade war is not good for the global or US economy. PR teams can spin it however they want, but it's not making life easier for businesses or consumers. That's not a win-win situation. I'm sure investors would have been happier in a scenario where they coasted to a 5% to 10% mid-year gain in the S&P 500. However, bursts of volatility — be it from an unwinding currency trade or from events like 'Liberation Day' — do give patient, long-term oriented investors an opportunity. Obviously, that's easier to say with the S&P 500 now at record highs, and admittedly, the tone would be much different if we had a trade-war-fueled recession on our hands. But as Morgan Housel noted — and I'm paraphrasing — 'volatility is the fee we pay for enjoying longer-term returns' and that advice has continued to ring true time and time again.
