Amidst the optimism, there has been much talk of equity-market performance returning to historical norms. It is important to note, however, that the possibility of additional Fed tightening to stem any latent inflationary pressures in the economy is a key unknown that could limit the market's gains. The Fed's recent comments, however, would appear to make this an unlikely scenario in the near term. What's more, given the recently approved federal budget deal that liberalized the rules governing individual retirement accounts and created a new type of IRA, this total could be even greater.
Demographics continue to support retirement-savings flows.
Equity funds, by and large, continue to be the product of choice for this group. The efforts that many firms are making toward investor education concerning overseas diversification are continuing to bear fruit. As a result, the proliferation of asset-allocation programs, the corresponding focus on limiting a fund portfolio's downside risk and an increased emphasis on style diversification, should all fuel overseas fund flows. Bond Funds Continue as Forgotten Sister to Equity Funds Despite the most attractive valuations in terms of real yields and other measures since 1995, FRC expects U.S. bonds to remain in a trading range - much as they've been over the past several months. With an expanding economy, the potential negative for bonds, as well as equities, is a resumption of Fed rate increases.