Investors have recently woken up to the reality of overpriced US momentum stocks in technology and biotech. But a knee-jerk shift toward defensive sectors isn’t the answer.  [Read More...]

With the recent wobbles in the market, scary headlines about stock bubbles are back in the spotlight. We think all this foreboding overlooks an important point: In today’s low-return world, where better than stocks to put your money? [Read More...]

Investors in Australia have been wary of undervalued, risky stocks in recent years. But today, market conditions have improved and many attractively valued companies have strong balance sheets, which we think should support a continued recovery. [Read More...]

Small-cap stocks have lagged large-cap stocks by a substantial margin over the past few months, but a close look at the causes makes us think they could be in for a reversal of fortune. [Read More...]

It’s often hard to resist the temptation of an inexpensive, passive equity allocation. But we think you can find plenty of good reasons to go active just by looking around the markets today. [Read More...]

Equities are expensive. It’s difficult to argue against this. But does this also mean that markets will fall sharply? Assuming that there are plenty of other factors that could drag equity prices lower, the high valuation alone is probably not enough reason for a new market correction. Granted, the price-earnings ratio is high, in some cases even historically high. The Shiller PE, which looks at corporate earnings development over the last ten years, is over 30 in the US, which happens rarely. And the graph shows that Warren Buffett’s favorite valuation indicator – total market capitalization as a percentage of GDP – also indicates historically high equity valuations.   Correction looming? Are the high equity valuations the harbinger of a correction? Given the high degree of … [Read More...]

Japanese prime minister Shinzo Abe’s latest blueprint for sustained long-term economic growth was met with quite a bit of skepticism. It’s easy to play down the so-called Third Arrow as an assortment of cryptic reform measures. But we believe that there’s some substance that warrants equity investors’ attention. [Read More...]

Many investors think US stocks are due for a correction: They feel that the market has run too far, that the Fed has been slow to act, that complacency has created pockets of excess. Do these gut feelings mean a major equity correction looms? Not yet, in our view. [Read More...]

Despite worries about a collapse in China’s property market, we think the financial system will navigate the coming credit cycle if banks can buy time to resolve loan problems—and receive government support if needed. [Read More...]

After a sharp five-year rally in US real estate stocks, investors are questioning whether they may be vulnerable to a rise in interest rates. Our research suggests that global real estate stocks may be more likely to weather a changing rate environment. [Read More...]

It’s getting harder to generate equity returns in emerging markets (EMs). Simply chasing the index—the so-called beta trade—won’t do the job anymore. But with a more discriminating, active approach, we believe investors can still capture opportunities in the next phase of the EM growth evolution. [Read More...]

Many things have changed in emerging markets (EMs) over the last two decades. Markets are more efficient than they used to be. But we believe that developing countries still provide fertile ground for finding stocks poised to outperform. [Read More...]

Plans for a new Shanghai-Hong Kong trading system are among three developments that we expect will give a boost to China’s equity markets in the medium to long term. So despite concern about the economic outlook, now could be the time to begin rethinking China from an investment perspective. [Read More...]

After a jittery January, investors in US equities are gritting their teeth. But even if equities lose some steam after last year’s rally, we think company fundamentals and the interest-rate environment should support a resilient market in 2015. [Read More...]

Regime shift US stocks have outperformed their global and emerging counterparts by a mile in the last ten years. But this hasn’t always been the case. For example, in the decade prior to that, the S&P 500 Index realized a negative return while emerging markets skyrocketed 188%. So what about the ten years to come? Given the lofty valuation of US stocks, the CAPE being above 30, stock markets outside the US may well outperform. That said, the performance gap between US and the rest of the world can partly be explained by the US being home to a number of technology firms that have reshaped many aspects of daily life. This is not something that will shift overnight. Is the manufacturing glass half full or half empty? … [Read More...]

With the euro sliding deeper against the dollar this week, equity investors have been getting nervous. But why is everyone so surprised when known currency fluctuations derail earnings? In our view, a sharper focus on company exposures can help create a “natural” currency hedge in global equity portfolios. [Read More...]

It’s been another tough start to the year for emerging-market equities, amid growing concern about political risk and economic growth. But we believe the seeds have been sown for a recovery that can best be captured through a selective investing approach to avoid the risks of a benchmark. [Read More...]

Since the low point for the equity markets during the global financial crisis in 2009, Eurozone equities have lagged their US counterparts by an impressive 300%. Why is this? By the look of things, it’s a combination of different factors. The first – and most important – reason is that US companies have performed much better than their European counterparts when it comes to corporate earnings. The graph below shows that since March 2009, the earnings per share of companies in the S&P 500 have increased 170%, compared with an increase in earnings of precisely 0% for companies in the Eurostoxx 50. Some of this difference can be explained by share buybacks, but for the most part it can simply be put down to profitability. Heavyweights The second reason is … [Read More...]

Investors who wanted safety and certainty last year mostly shunned smaller-cap US stocks. As a result, many high-quality names are now on sale. With US growth likely to accelerate in 2015, we think these domestically oriented smaller-cap companies may turn out to be a real bargain. [Read More...]