Why US equities could be hard to beat in 2011 (Fund managers seem to be unanimous on this)

The Telegraph ^ | 12/13/2010 | Tom Stevenson

[SeekAndFind]

Emerging markets, especially Asia outside of Japan, were top of everyone's list for 2011. The US did not get a look-in.

That set my contrarian antennae twitching, and events over the pond last week have confirmed my view that next year might be quite a good one for investors in the world's biggest stock market. Politics, monetary and fiscal policy, corporate strength and valuations all point to the US market ending 2011 significantly higher than today.

The US electoral cycle has tended to favour the year after the mid-term elections, especially when a lame duck president is forced to hold his nose and do deals. Last week's fiscal package represented a significant climb-down by President Obama, and the extension of George W Bush's tax cuts beyond their planned end-2010 expiry removes one of the biggest obstacles to continuing economic recovery next year. The biggest surprise in the package was a 2pc cut in payroll taxes, which will on its own give the economy a $120bn (£76bn) annual boost.

This means the outlook is clearer in the US than almost anywhere else in the world. Not for Americans the fiscal austerity that will make 2011 a chilly year in Britain. Not for them the sovereign debt worries afflicting Europe (although the $900bn increase in the US's deficit as a result of last week's measures will come back to bite it at some point). Nor do they face the inflation concerns hanging over China and other emerging markets.

Inflation is, in fact, running considerably below the Fed's implicit target despite US interest rates having stood at an effective zero rate for two years now. Goldman Sachs thinks they will stay there for another two years,

[RexBeach]

Too many investment advisors are bullish, so look for a pullback around these levels somewhere.

And as far as emerging markets go, careful on this much agreement. If you invest the way everyone else is investing, you might make some money, but probably not as much if you go the other way. Just a little contrarian thought there.

Keep smiling and keep those chins up! -Rex

[broken_arrow1]

The quickest way to the bottom is straight down. Watch out - 2011 will be a thrill ride at a theme park!

[MsLady]

PING

[monocle]

The year before presidential elections is head and shoulders against all the other years. This pattern has held for nearly a hundred years.

[SeekAndFind]

This seem to be the reason why fund managers believe that money will flow into equities (from the article ) :

The rise in yields on government bonds in the past few weeks might mark a watershed moment when investors start to question whether they have got their money in the right place.

After a couple of years of outflows from equity mutual funds, the tide is turning as investors accept that they have to move into riskier assets if they are to hope to replace the income they have lost from their risk-free deposits.

[broken_arrow1]

http://www.stansberryresearch.com/pro/1011PSIENDVD/PPSILC42/PR

[RexBeach]

Could be. But a lot of the advisers are chasing performance because they’ve been in bonds for so long.

[RexBeach]

Could be. But a lot of the advisers are chasing performance because they’ve been in bonds for so long.

[Buckeye McFrog]

translation: no matter how badly Obama screws things up, the EuroSocialists are capable of doing far, far worse

[Alberta's Child]

I have a good friend who runs a private equity fund, and he was right on target the last two times I had conversations with him about economic trends. He was shorting oil futures when oil was over $140/barrel in 2008, and he was buying U.S. stocks in early 2009.

His rationale for his bullish sentiment in the U.S. stock market was that despite all of our problems, we're still an attractive place to invest compared to most of the world.

[Colvin]

If you look at the demographic, the folks moving out of long term bonds, they will probably be looking for income. In that case look for a rise in dividend stocks.
I am not with the Beans, Rice and Ammo crowd for 2011. Profits are up, and interest is too low.

[Uncle Miltie]

Sell signal.

[SeekAndFind]

Let’s say you have the cash and you sell your equities, where are you going to put them at this point in time?

[Uncle Miltie]

I go look for the worst-performing Stock Index Fund I can find at Vanguard, which is the European one right now, up only 3% this year. I put in some money when it was -6% earlier, so I’m up 9% over the last few months.

European Stock Index
Redemption Fee:2% if held < 2 mos VEURX International 3.51% –3.26% 2.05% 3.16% 7.40% 06/18/1990