Tags: Mobius | US | stocks | emerging

Mobius: It's Time to Shift From US Stocks to Emerging Markets

By    |   Wednesday, 22 April 2015 07:00 AM

Mark Mobius, executive chairman of Templeton Emerging Markets Group, recommends that investors gravitate from pricey U.S. stocks to emerging markets stocks.

Falling profits are the problem in the United States, he tells CNBC. The 56 S&P 500 companies that reported first-quarter earnings through last week produced a blended drop in profits of 4.1 percent, according to FactSet.

"Earnings will not be as good as people expect simply because they have a lot of headwinds," Mobius said. One headwind is the tepid pace of U.S. economic recovery. The Atlanta Federal Reserve's forecasting model puts first-quarter economic growth at only 0.1 percent.

In addition, "government pressure on businesses has been very, very great under this administration," Mobius said.

"They hate the banks to begin with, so banks are not able to give businesses the support that they really need. As a result, companies have been conserving cash and buying back shares. That doesn't do much for earnings, so expansion is not really there except in the tech space," he stated.

Since the beginning of the year, emerging markets have been "outperforming the U.S. and the world."

"Now's the time to shift out of the U.S. into other markets," Mobius noted.

Meanwhile, you can add former Treasury Secretary Robert Rubin to the list of those concerned that bubbles may be building in financial markets.

"I don't have a personal view on whether we now have [market] excesses or not," he said at a conference in Washington last week, MarketWatch reports.

"But it certainly is a realistic possibility when you look at the U.S. stock market, which is near all-time highs, when you look at covenant-light and now non-covenant lending, [and] a vast increase in fixed-income [exchange-traded funds]."

While the Fed is focused on inflation and the economy, it should keep an eye on financial markets too, Rubin said.

"I believe that the Fed should take systemic risk into consideration in monetary-policy decisions, even though excesses and bubbles are impossible to identify with confidence except ex-post."

The central bank has kept its federal funds rate target at zero to 0.25 percent since December 2008. Many economists believe it will start raising rates in September.

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Mark Mobius, executive chairman of Templeton Emerging Markets Group, recommends that investors gravitate from pricey U.S. stocks to emerging markets stocks.
Mobius, US, stocks, emerging
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2015-00-22
Wednesday, 22 April 2015 07:00 AM
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