Before the advent of Trump 2.0 investors are rethinking the positioning of their portfolios and after the rally that the markets have been adding in the recent years, which and accumulates 26% in 2024, They also have doubts about the valuations that stocks have reached on Wall Street.
Here also the crack emerges between those who prefer to continue betting and those who consider taking profits. Days ago, one of the sharpest stock market observersspoke with him specialized channel CNBC and considered US stocks to be expensive and now I was looking opportunities in cheaper markets with what it considers better risk-adjusted returns.
He said it Kunal KapoorCEO of Morningstarwho believed that markets were USA They were more attractive than Americans by and large from a valuation perspective. According to his account, Amala Balakrishner CNBC, a Morningstar report on the outlook for 2025 noted that many major US stocks look expensive and, consequently, offer lower future returns.
Therefore, in the face of 2025, noted that asset class valuation models point to low single-digit returns in the US.
Opportunities in the energy sector
He adds that in this context, the firm maintains its market weight stance on US stocks, but remains optimistic sectors such as energy, with cheap stocks trading at a discount to their fair value.
“I’m not saying investors should look outside the US entirely, but rather our recommendation is to perhaps partially adjust their portfolios to overweight non-US stocks over the next five to seven year period, as future returns are likely are higher outside the US”Kapoor explained.
Opportunities in markets in Japan and China
Balakrishner points out that looking to the future, the CEO of Morningstar is optimistic about markets like Japan and China, that present attractive pockets of opportunity: Specifically, Chinese stocks stand out from a valuation perspective because there is a gap between the fair values of many major companies relative to their share prices today.
It should be noted that Morningstar’s optimism about China apparently comes amid a series of government stimulus measures, including interest rate cuts, lower cash reserve requirements at banks, more flexible property purchase rules and liquidity support for securities markets and, more recently, a debt swap program.
From Morningstar, they explain that Investing in the Chinese market carries geopolitical uncertainties, so careful management of total portfolio exposure is crucial, including sizing aggregate positions to take into account various regulatory, geopolitical and economic risks.
Where does Morningstar see opportunities? In general, in higher quality names with room for maneuver, such as the chain of fast food restaurants Yum China Holdings and technology giant Tencent.
As for Japan, Kapoor likes that the market offers pockets of undervaluation. It is worth noting that the Japanese markets have been on a bearish trend recently, but the benchmark index Nikkei 225, which includes the top 225 companies on the Tokyo Stock Exchange, rose 14.6% since the beginning of the year, while the Topix index rose 12.2%.
Kapoor explained that factors such as a change in companies’ capital allocation strategies and the recently launched Nippon ISA program, which allows residents to invest in the stock market without paying taxes on dividends or capital gains, have put Japan in the focus of investors’ attention. “This is also why we see investors like Warren Buffett buying large stakes in Japan,” stood out.
Source: Ambito
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