New Investment Trends: Latin American Equities can Turn Hot Again; Municipal Bonds are Shining in 2014

Long time observers of the financial markets know that the top investment areas from last year are often become laggards the next year, and vice versa. This year is no exception. Last year’s market leaders, which include social media, biotechnology and solar energy stocks are struggling to gain momentum, while new investment opportunities are emerging in unexpected ways.

One of our favorites is the newly emerging bullish trend in Latin American equity markets. Economic and social challenges are highly publicized for countries in the region. However, the chart pattern for the Fidelity Latin America Fund (FLATX) is turning bullish. Markets can anticipate changes in underlying economic conditions 6 to 12 months into the future. If this is the case for Latin American stock markets, then this may be a perfect time to take initial positions.

The top panel of the chart below plots the ratio of FLATX and the S&P 500 and we can see the reversal of last year’s underperformance by FLATX. The bottom panel shows the bullish chart pattern of FLATX breaking a long-term downtrend, and after a few weeks of consolidation, beginning to move higher:

flatx

The second emerging trend is in municipal bonds. Investors got weary of the news last year both about the bankruptcy of the city of Detroit and the potential default of the government debt of Puerto Rico, which brought the municipal bond market down. But this year is different. The Fidelity Spartan Municipal Income Fund (FHIGX) shows a bullish breakout by making a new high above the resistance level:

fhigx

 

The long-term chart of FHIGX shows that this emerging new trend in the municipal bond market can become a great way for investors to diversify:

fhigx-2

 

Buy and sell signals for Fidelity funds are available at FidelitySignal.com

 

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