| NEW YORK
NEW YORK May 31 For the second straight summer,
politics look to be dictating the market's moves.
A year ago it was the Aug. 2 deadline to raise the U.S. debt
ceiling. This time around, market strategists and analysts have
circled June 17 as a key date.
That's the day parliamentary elections are scheduled in
Greece, which may determine whether the country continues to
accept austerity measures as part of its bailout plan or may
lead to it leave the 17-member bloc of nations that use the
Polls suggest the election will be close, leaving investors
in the lurch. Concerns about possible fallout from the Greek
election have helped put the S&P 500 on track to close out May
with its worst monthly performance since September, analysts
said, and the yield of the 10-year U.S. Treasury hit the lowest
point ever on Thursday for records that go back to the start of
the 19th century.
"It's a classic case of uncertainty. If Greece collapses and
Europe goes into a deep recession, you don't know how much
further it might go. That unanswerable worry is keeping
potential buyers out of the market," said David Kelly, chief
global strategist at JP Morgan Funds.
Yet some analysts remain optimistic that the outcome of the
Greek election may provide opportunities.
LOOKING FOR BALANCE
Kelly said he expects the global stock market to stage a
"significant rally" if Greece's conservative pro-bailout New
Democracy party wins the election.
He cautions, however, against making a big bet on a positive
outcome. Instead, he said, investors should ensure that their
asset allocation is balanced between exposure to stocks that
could benefit from a positive outcome and bonds that provide a
measure of stability.
"If you are in a boat in stormy seas, the best place to be
is in the middle of the boat," he said.
Jerry Webman, chief economist at Oppenheimer Funds, agreed
that investors shouldn't rush toward assets that are
traditionally considered safe havens. Ten-year Treasuries "do
not have value" at their current yields, he said.
"I think that the biggest risk to the U.S. stock market is a
pattern of good news that catches people unawares. Clearly
people are doing whatever they can to be defensive right now,"
Investors could instead consider a balanced fund like the
$1.3 billion Manning & Napier Pro-Blend Moderate Term fund
, which has about 51 percent of its assets in bonds, 32
percent in U.S. stocks, 12 percent in international stocks and
the remainder in cash, according to Morningstar.
While the fund has a significant stake in both U.S.
government and corporate bonds, its holdings are more
diversified than its competitors. Nearly 10 percent of its bond
portfolio is in Canadian fixed income, well above the category
average of 1.5 percent, according to Morningstar.
The fund has returned an annualized 2.2 percent over the
last five years, or 1.5 percent more than its category,
according to Morningstar. It charges an expense ratio of $1.07
per $100 invested and yields 1.45 percent.
Investors looking for a passive investing option could
consider the $16.1 billion Vanguard Balanced Index fund
, which is tilted more toward U.S. stocks than the
Manning & Napier fund. U.S. stocks make up approximately 59
percent of its portfolio, international stocks make up just 0.4
percent, while bonds make up approximately 37 percent, according
The fund has returned an annualized 2.9 percent over the
last five years, or 2 percent more than its category, according
to Morningstar. Vanguard's popular Vanguard 500 index fund, by
comparison, has returned a negative 0.95 percent over the past
Vanguard Balanced Index fund charges an expense ratio of 10
cents per $100 invested and yields 2.1 percent.
WAITING FOR OPPORTUNITIES
Some investors are sitting on cash and waiting for the Greek
election to pass before making any big moves.
Jeffrey Kleintop, chief strategist at LPL Financial, said
his team recently raised its cash stake by 20 percent in light
of the low yields for Treasuries and the slide in the price of
gold, which is on pace to close out May with a decline of 6
"It's hard to buy the safe havens now given how expensive
the 10-year Treasury is and how gold has been trading," he said.
Kleintop is waiting until after the Greek election to
increase his position in emerging market stocks and commodities
like copper, silver and agriculture.
"We're further along in the commodities correction than in
equities or the bond market," he said, noting that some
commodities have pulled back 20 percent from their most recent
The $2 billion iPath DJ-UBS Commodity Index ETN is one
option for a broad-based bet on commodities. The fund limits its
exposure to energy commodities to a third of its portfolio, and
has significant stakes in agricultural commodities and
industrial metals, according to Abraham Bailin, an analyst at
As an exchange-traded note, the fund is exposed to the fate
of its issuer, Barclays Bank. The bank's current
credit rating is excellent, Bailin noted. The bank has an A
rating from S&P, according to Thomson Reuters data.
The fund, which charges 75 cents per $100 invested, is down
9.3 percent so far this year.