Thursday, June 23, 2011

Are the Emerging Markets A Better Bet than US Stocks?


Richard Bernstein was formerly chief market strategist for Merrill Lynch. Rich made a number of very good market calls over the years he was at Merrill, including a prescient call advising investors to switch from tech stocks to oil stocks back in 2000.

Rich has since left Merrill to start his own investment advisory shop, and now manages money for mutual funds as well as individual accounts.

However, Rich still gives a number of presentations, and he usually has some pretty good observations.

For example, I saw this short piece in Financial Analysts magazine. Here's an excerpt:

U.S. investors might not know it, but the Standard & Poor's 500 Index has now outperformed the BRIC nations' equity market for almost 3 1/2 years, Richard Bernstein told attendees today at the second annual Innovative Alternative Strategies Conference in Chicago.

Rich continues to more bullish on US stocks than the emerging markets sector, bucking the consensus that says you should always invest in countries with the highest growth rates:

Challenging the conventional wisdom, Bernstein said that he considered U.S. small-cap companies to offer more potential than any other asset class in the next decade. "The projected earnings growth rate of U.S. small-cap companies is 50% higher than that of Chinese companies," he said.

S&P 500 Beats BRICs For 3-Plus Years, Bernstein Says

There's one other point that I would add to Rich's comments. Based on data from Ned Davis Research, the volatility of the emerging markets is nearly twice that of the US large cap markets.