I am bullish developed market equities, moderately bullish on Asia and Emerging Market equities. Sometime in mid 2014 the US could finally start to taper. Then, Asia / EM equities and local currency bonds may be sold down again as hot money returns to the US. USD will strengthen against most currencies then. The 10 year UST may rise above 3%.
Another 30% increase in the S&P500 will see it reaching the dangerously overvalued territory. It will then be prime for another big correction.
The Euro Stoxx 50's CAPE is around 13x. Another 30% increase will also see it reach median level. I believe a simultaneous correction with the US could occur but at a lesser extent.
Asia / EM's property markets will start to deflate. I expect the overbuilding in Singapore, China and many developing countries will cause rental rates to drift downwards and yields to fall dangerously below mortgage rates.
In Europe and the US, the property market recovery will be in full swing. Ironically, Asia / EM stocks will be well below their median valuations in 2014 and be ripe for value investors.
2014 could well be the final year of the equity rally. In 2015 we could see an equity bear market globally, real estate bubble burst in Asia and Emerging countries, primarily in China, Singapore, most ASEAN countries including Malaysia. Property prices may fall 10 - 30% from now until 2015. But in the west, real estate prices will merely pause or just correct between 5 - 15% because they are far more affordable.
