Salient to Investors:

Jim O’Neill at Goldman Sachs says:

  • China equities are very cheap and are the best place to be in 2013.
  • Don’t expect draconian tightening in China as inflation last year was way below their target and the government has been careful not to stimulate economy too much and are doing a good job. Recent market correction and February economic data was surprisingly soft. Chinese financial conditions have not eased that much in the past 6 months.
  • All BRICs except India are cheap or reasonably valued. Russian equities are particularly cheap.  The BRICs biggest problem was their expensive levels before the 2007 crisis, but their economic importance is growing dramatically and they are the biggest economic phenomenon of our generation – they create virtually the equivalent of another Italy every year.
  • Expects the S&P 500 to rise to 1575 in 2013 and then a 1500-1600 range but US economic growth will have to accelerate to ridiculously strong levels like 4 percent or more to justify above 1,600. Prefer peripheral Europe, Japan and some of the big emerging markets.
  • Abenomics is big and once Japan economy shows signs of improvement, then their domestic investors will join the huge buy-in from international investors in Japanese equities – a big story.
  • Yen will be 110 or weaker in 18 months but to head in that direction will require US economy to do well that the Fed changes its QE – the easy move for the yen is over.

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