Tags: Ablin | US | Europe | stocks

BMO's Ablin Turns From Bullish to Neutral/Bearish on US Stocks

By    |   Thursday, 19 February 2015 12:43 PM

Jack Ablin, chief investment officer at BMO Private Bank, is joining the chorus of financial experts singing the praises of foreign stocks relative to their U.S. counterparts.

Ablin has recommended to clients that they overweight large-cap U.S. stocks since 2010, and BMO is now 50 percent overweight. But no more, Ablin tells MarketWatch columnist Howard Gold.

"We're going to go from substantially overweighting the U.S. to neutral to underweight,” he said. "This is a major policy decision. I believe over the next three to five years the U.S. is going to take a back seat to international markets."

And why is that? "The U.S. [stock market] has gotten expensive. It's going to disappoint," Ablin said. U.S. stocks trade at 1.8 times sales, compared to 1.0 for developed foreign markets. These valuations suggest a negative 1.7 percent annual return for U.S. stocks during the next three years and a positive annual return of 7.4 percent for developed-market stocks during the same time period.

"Economic results out of Europe are starting to surprise, while the U.S. has started to disappoint," Ablin notes.

Others make much the same argument.

Nobel laureate economist Robert Shiller of Yale University says he's considering a move to European stocks from U.S. stocks because of cheaper valuations overseas.

The MSCI Europe index had a trailing price-earnings ratio of 17.37 as of Jan. 31, compared with 20.44 for the S&P 500 Feb. 13.

"I'm thinking about getting out of the United States somewhat. Europe is so much cheaper," Shiller, who has about half his portfolio in stocks, tells CNBC.

Already he has invested in market indices in Italy and Spain. The FTSE MIB Index of Italian stocks has returned 13.2 percent so far this year, and the IBEX 35 Index of Spanish stocks has returned 5.7 percent. The S&P 500 has returned 2.1 percent.

Peter Oppenheimer, chief global equities strategist at Goldman Sachs, also recommends European stocks over the United States.

"[European] economic activity has been weak, there were a lot of concerns last year. . . . But as [quantitative easing] started to come through, those fears are fading a little bit, and that's what's buoying the European market," he tells CNBC.

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Jack Ablin, chief investment officer at BMO Private Bank, is joining the chorus of financial experts singing the praises of foreign stocks relative to their U.S. counterparts.
Ablin, US, Europe, stocks
367
2015-43-19
Thursday, 19 February 2015 12:43 PM
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