Cinco expertos dicen las mejores oportunidades de inversión hoy:
Five experts reveal the opportunities they see around the world.
Another three months, another nice run for the S&P 500 Index, which rose 4 percent in the year’s third quarter. That jump came in the wake of last quarter’s talk about a “frothy” market and an aging bull.
The market’s continued gains can make being cautious—moving some money out of stocks into cash, sitting on the sidelines—feel particularly painful. But if investors are getting jittery, well, October 19 marks the 30th anniversary of the 1987 crash, and October is a month known for nasty surprises.
That shouldn’t mean a heck of a lot for investors who have well-diversified portfolios and the financial basics well in hand—a savings plan on autopilot and a healthy financial emergency fund, for example. Well-prepared, long-term investors are in a good position to weather whatever October may throw at them. Check out The Seven Habits of Highly Effective Investors.
The five investing experts featured in this quarterly series have survived many stock market cycles, and just one sounds a note of caution this time around. They see opportunities across a broad spectrum, stretching from health-care plays in China to battered value stocks; a couple are doubling down on previous calls. To see what they’ve recommended over the past year or so, click on one of the tabs below their names.
The strategies and investing themes that our experts suggest can be found in the mutual funds or investment portfolios some of them manage for clients. For do-it-yourself investors who like to use exchange-traded funds, Bloomberg Intelligence analyst Eric Balchunas chooses ETFs that are plays on the experts’ investing ideas and sums up the performance of the ETFs he highlighted in last quarter’s entries.
Here’s hoping for a boring October.
Chief executive officer, chief investment officer, Richard Bernstein Advisors
It’s Simple: Overweight Equities
The 2008 bear market and recession appear to have permanently damaged investors’ psychology. Despite the ongoing bull market, investors generally remain quite scared of a market sell-off. Although some surveys are beginning to show increasing enthusiasm for stocks, actual public equity allocations among individual investors, pensions, endowments, foundations, and hedge funds remain more focused on limiting the downside risk of public equity holdings than on potential opportunities.
Individual investors’ seemingly insatiable thirst for income more likely reflects risk aversion than demographics. Despite an extended period of very low equity market volatility, pensions, endowments, and foundations remain scared of public equity volatility and prefer illiquid and more expensive alternative assets. Even hedge funds have rejiggered strategies to focus on “absolute return” and “low net” rather than accept the risk associated with levered long-equity portfolios.
From 1926 to the present, the S&P 500 has produced positive 10-year returns 95 percent of the time, and positive five-year returns 88 percent of the time. Even quarterly returns have been positive 68 percent of the time. To myopically focus on the downside risk of public equities seems to be fighting history.
Some have argued that stocks are in an extended period of low returns, but the 10-year S&P 500 total return through September 2017 was 7.4 percent a year. That return is indeed below the 10-year median return of roughly 10 percent, but it does not at all suggest investors should punt equity allocations. The decade ending in December 2010 was actually the period of low returns. The S&P 500 returned a paltry 1.4 percent over that period. Since 2010, it has returned about 13 percent a year vs. bonds at 3.3 percent. Shouldn’t investors have significantly reallocated toward the superior returns of equities at some point in this cycle?
Investors should ignore the noise about short-term volatility and imminent market collapse and get back to the basics of asset allocation. My guess is that very few readers are significantly overweight public equities within their portfolios. Where to invest? Equities, plain and simple.
Chief executive officer and fund manager, Causeway Capital Management
Invest in China’s Health Care Demand
Shifting from an emerging to a developed country, China can’t escape its demographics. As a byproduct of the one-child policy, China’s enormous population increased at only 0.6 percent per year from 1996 to 2015. That compares with the U.S. population’s expansion of 0.9 percent a year over the same period.
Low growth implies an aging population, and aging has its societal costs. Many Americans are struggling to pay for health care, and the Chinese are facing an even bigger tab. By 2050, roughly a quarter of China’s citizens will be older than age 60. With less than 6 percent of gross domestic product spent on health care (vs. 9 percent to 12 percent in most developed countries), the Chinese will likely devote more of their resources to staying healthy.
With rising disposable income per capita, China’s demand for health care, especially top-tier hospital services, exceeds supply. The central government recognizes the problems and aims to relieve congestion at the most reputable public hospitals by welcoming private capital into the industry. This flow of funds should improve conditions and spawn many higher-quality private hospitals. Other reforms include the elimination of unneeded middlemen in drug distribution, as well as prohibiting the markup of drug and medical devices.
Hospitals had become heavily dependent on drug sales to keep the lights on. To supplement their measly salaries, doctors accepted prescription-related bribes from pharmaceutical manufacturers. After a successful pilot program, zero markup of drugs became reality for most hospitals across the country this year. To speed up the approval process for efficacious drugs, the China Food and Drug Administration quadrupled its staff in 2015-16 and is on track to increase staff by 50 percent this year.
China’s health-care industry reforms, combined with the inevitable consolidation or demise of smaller or weaker players, will likely result in much greater efficiency and profitability in such areas as hospital management, drug and medical equipment distribution, private supplemental health insurance, and new-drug discovery and launch.
To complement reforms, the Middle Kingdom boasts a rising supply of young scientific talent, who are paid about a third as much as their peers in the developed world. Add to the mix a 15 percent corporate tax rate plus government subsidies to spur innovation, and the investment landscape looks very promising for Chinese health-care companies. (The standard Chinese corporate income tax rate is 25 percent, but the rate could be reduced to 15 percent for qualified enterprises engaged in industries encouraged by the Chinese government. Indigenous Chinese health-care companies are included in that category.)
Pick Emerging Markets for the Long Run
I’ve discussed the appeal of emerging markets in previous quarters. I am going to re-up that position, as this is a decade-long trade (some would call that an investment) which is still in its early innings.
Consider recent history. During the 10 years ending in 2016, the total returns (with dividends) for the MSCI Emerging Markets Index (ticker: EEM) was minus 16 percent. Over that same period, the S&P 500 was up almost 85 percent. Note that this period also encompasses the entire financial crisis and recovery.
When we look at the spread between these two indexes, we note it is about as wide as it ever gets over time. Mean reversion being what it is, I expect that the spread is already beginning to narrow and will eventually invert, with the S&P 500 lagging emerging markets for an extended period of years. This has happened repeatedly in the past; it is already beginning now.
Emerging markets had a strong 2016, but four of the five prior years were negative. While the S&P 500 continues to make record highs, the EM index remains far below its 2007 peak—about 15 percent lower.
Both the U.S. and EM regularly experience lost decades. From 2000 through 2009, the S&P 500 fell 9 percent (with dividends reinvested). Since, then, it has been off to the races. Emerging markets, too, experienced a lost decade, from 1994 through 2003, gaining a mere 1 percent over those years.
Emerging markets have lagged behind the U.S. since the financial crisis ended in 2009. More attractive valuations and recent momentum could attract more investor attention to the sector. I expect this to be an investment that can outperform over the next decade.
Portfolio manager, BlackRock Global Allocation Fund
Don’t Give Up on Value
After a stellar back half of 2016, U.S. value names have largely disappointed in 2017. As the post-election euphoria faded and everyone faced up to the reality of still modest growth, most investors reverted to old habits: a focus on yield and growth at the expense of value.
Still, value’s relative performance may once again be inflecting. Value stocks outperformed their flashier growth cousins in September, and there are several reasons to believe that trend can continue.
First, value is cheap. While value stocks are by definition cheaper than growth, today they are much, much cheaper. Since 1995 the average ratio between the Russell 1000 Value and Russell 1000 Growth Indices (based on price-to-book) has been 0.45; i.e., value typically trades at a 55 percent discount to growth. Currently the ratio is 0.30. Value has not been this cheap relative to growth since early 2000.
In addition to being cheap, for the first time this year value may once again have a catalyst. It normally outperforms when economic expectations are improving. In contrast, when economic growth is modest, investors are more likely to put a premium on companies that can generate organic earning growth, regardless of the economic climate. This dynamic helps explain the strong year-to-date rally in technology and other growth stocks.
Recent economic data, however, have been modestly stronger, and investors are, once again, entertaining visions of tax cuts. Granted, the economic impact of temporary tax cuts is more a sugar high than structural reform, but you take what you can get. At this point, even a modest boost in near-term growth expectations is arguably enough to shift investor preferences.
This creates an opportunity for value. In an environment in which investors are more sanguine about economic growth, they are more likely to notice that value stocks are not only cheap but also offer better leverage to any economic acceleration. Value is not dead yet.
Principal and global head of Vanguard’s Equity Index Group
Beware Market Timing
Figuring out where to invest this year has been quite a challenge. Equity and fixed-income valuations are stretched, with major stock indexes at all-time highs and bond yields barely outpacing inflation. Still, we caution investors against the folly of market timing. Our long-term models forecast equity returns in the 6 percent to 8 percent range and fixed-income returns in the 1 percent to 3 percent range annually over the next decade.
To be sure, I emphasize the importance of sticking with a savings plan to remain on track with your financial goals. Given relative valuations in today’s market, however, it makes sense to step back and take a holistic look at your financial situation and options for deploying capital.
Assuming your savings plans are on track, $10,000 might be better spent paying down debt. Extremely low interest rates made it easy for individuals to refinance high-interest-rate debt, but the future interest-expense savings from paying down even reasonably priced debt could potentially outweigh investment returns.
Another option is investing in a good cause by donating some of the money to charity. This serves a dual benefit: helping others and earning a tax write-off. There is certainly no shortage of worthwhile charities in need, especially with the recent spate of natural disasters. The resulting tax benefit will largely depend on your tax bracket. And remember to check with your employer to see if they’ll match a portion of the gift.
As always, make sure you consult a financial adviser or tax professional to fully understand how these strategies might affect your financial plan.
PD1: Con un mercado en máximos históricos (EEUU, Alemania), las valoraciones son lo más importante. Solo encuentras buenos precios en los mercados emergentes:
Y si comparamos las valoraciones con la volatilidad (VIX), el ratio marca que o bien sube la volatilidad o bajan los precios…
Las empresas que han liderado las subidas, las FANG, se están agotando:
Y el tirón del euro, debilidad del dólar, puede estar agotado. Es un tema del diferencial de tipos de interés:
PD2: Elimina de tu vida todo aquello que te cause estrés y te quite la sonrisa. Sobre todo los lunes. Que cuando lleguemos a casa, desconectemos del día aterrador y de la tensión del trabajo, y seamos los tíos más simpáticos del mundo… Nos lo agradecerán.