If there is one thing that keeps the members of the Moneyweek Roundtable awake at night it appears to be American consumers. How long can they keep spending and spending?
For a while now the answer to that has been a great deal longer than anyone dared to think three years ago. They have refinanced their houses over and over again and run up record levels of debt in their efforts to make sure they have the latest gas-guzzling SUVs and pointless electronic products.
And just as we all began to think it really must be over, out came numbers showing that US retail sales massively exceeded expectations in March: they jumped 1.8% month on month. Amazing! Still, that splendid-sounding data in itself should hasten the end of the splurge. Why? Because it brings us closer to the day when the Federal Reserve will raise rates, something that should remind a lot of people why their grandmothers always told them to never a borrower be'. Then, as the refinancing roundabout slows and repayments rise, the spending should fizzle out.
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But what will happen then? You certainly won't want to hold much in the way of US equities, but many of the stockmarkets that have performed so well over the last few years - those in Asia and Japan, and China in particular - are also, to a degree, dependent on the strength of the US.
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Yes, the Japanese recovery is gaining domestic momentum and Chinese growth is not all about shipping rubbish to the US, but exports to the West still matter for both economies. That means that investors might be wise to diversify into markets that aren't dependent on the buoyancy of the US shopper.
One answer - or so says our Roundtable - is Russia: pretty much all it exports to the US is oil, so monthly retail sales numbers are pretty by the by to its economy.
But there are other reasons to buy into Russia. One of the best is that it is still cheap. Russia's economy is growing at a good 5-6% a year, yet the market trades on an average p/e of around seven to eight times. That's practically free next to the S&P500's astronomical 26 times and the FTSE 100's 17 times.
The other reason to own a Russian fund of some kind is, of course, the market's exposure to the energy sector. If you think, as I do, that the oil price is likely to stay high for now and rise significantly over the longer term, what better place to be invested than in a stockmarket in which 70% of the market capitalisation is oil and gas related?
