Salient to Investors:
Richard Bernstein at Richard Bernstein Advisors writes:
- The bull market is intact. Markets rise after the Fed starts raising as earnings trump rising rates, and there is no end of cycle behavior, like excessive leverage or a big buildup in inventories except for energy.
- The MSCI European stock index is up 11% year-to-date, but only 5% in dollar terms.
- Currency is the most important issue when investing globally: between 2002 and 2008 the decline in the dollar accounted for 80% of the gain in the Euro Stoxx 50 index for US investors.
- The dollar rise since 2011 will continue so US investors should hedge this risk.
- Bullish on South Korea, which is where Japan was 2 years ago. South Korea has terrible corporate profits and is slipping into deflation so has no choice but to depreciate the won.
- China is at a competitive disadvantage because their currency is somewhat pegged to the dollar and their companies have a lot of dollar-denominated debt, so they are unable to depreciate and will lose market share.
- India is unable to depreciate because of high inflation so will lose market share to Japan and South Korea.
FactSet predicts S&P 500 earnings will fall 4.7% in Q2, rise 2% excluding energy: for all of 2015 rise 1.6%, 8.2% excluding energy.
Bank of America Merrill Lynch says fund investors remain bullish on European stocks.
Read the full article at http://www.thinkadvisor.com/2015/06/22/dont-worry-about-the-bull-market-worry-about-the-d?eNL=55886aae150ba045336e3852&utm_source=earlywire062315&utm_medium=enewsletter&utm_campaign=earlywire&_LID=179068825
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