Why investors should avoid market monomania
Today’s overwhelming focus on US markets leaves investors guessing about opportunities and risks elsewhere
My hope when markets began to wobble earlier this year was that the spotlight would start to shift a little bit away from US equities. This isn’t because I’m a committed bear on America. Yes, I am uncomfortable with how much a typical global portfolio will now have in pricey-looking US stocks when domestic politics are clearly becoming less business-friendly. However, that is about managing risk rather than a firm certainty that the tech boom has yet run its course.
Instead, my concern is that the amount of commentary that hinges on the US market, US economy and US politics – indeed, anything wrapped in the stars and stripes – has become monomaniacal. Markets have far too little idea what is happening elsewhere. Take the entire UK stock market, which is dying in part because there is so little attention paid to the small- and mid-cap segment that it no longer functions. The number of take-private deals at large premiums to the undisturbed price testifies to that.
When MoneyWeek was founded 25 years ago, analysis and commentary in the industry and the media included a range of sectors, countries and assets every week. Coverage began to decline after the financial crisis and worsened as the tech boom and the strong dollar sucked in capital. Now, many areas are neglected for long periods.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Investors are noticing emerging markets again
Consider emerging markets. I wrote about this shift relatively recently, but it bears repeating. After ages in the doldrums, they are having a good year: the MSCI Emerging Markets index is up by 16% in sterling terms in the first nine months (developed markets are up 8%, the US is up 6%). Yet that scratches just the surface of the changes: within the EM universe, India – the main bright spot of the past decade – is off 8%, while China has rebounded 29%. Korea is up 44%. Emerging Europe and Latin America are all doing very well. One cannot argue that there have been major economic or political shifts in most of these countries to change the case for them. The conclusion is that many are simply being noticed once more as flows into the US slow down.
The wider point here is not about emerging markets, but about the merits of keeping some of your portfolio in assets that are sensibly valued even when they are lagging. As private investors, we don’t need to worry about measuring our performance against a benchmark. Our goal is not to wager everything on the top-performing stocks and collect a performance fee. We aim to maximise our odds of earning a solid return and minimise our risks of devastating losses. Paying attention to out-of-favour assets is part of this.
As a final note, the MoneyWeek Wealth Summit – our annual event and MoneyWeek’s 25th birthday – on 7 November in London will run along these lines. Yes, it’s called Turmoil, tariffs and Trump 2.0. Yes, we have a session on AI. But our speakers will be looking at growth, value and wealth-preservation opportunities to suit a world that is mostly not America.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.
Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.
He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.
-
Ofgem could write off £500 million of energy debt for 195,000 households – would you be eligible?Energy debt costs the average billpayer on the Ofgem price cap £52 a year.
-
Magnificent Seven earnings previewA busy week for Magnificent Seven earnings kicks off with three big tech companies announcing results on one night. What should investors expect?
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Cash in on the vast growth potential of the companies electrifying the worldOpinion Martin Todd, portfolio manager, head of sustainable equities, Federated Hermes, highlights three electrification companies where he'd put his money
-
Galliford Try has firm foundations for strong growthBuilder Galliford Try has a finger in a wide range of pies, notably important work in the public sector
-
Card Factory is a stand-out small-cap going cheapIn a digital world, we still value the personal touch. That’s good news for Card Factory, whose unique business model is suited to weather all economic storms
-
8 of the best smallholdings for sale nowThe best smallholdings for sale – from a medieval cross-passage farmhouse in Taunton, Somerset, to a former farmhouse with an orchard in the Welsh Marches
-
How much gold does China have – and how to cash inChina's gold reserves are vastly understated, says Dominic Frisby. So hold gold, overbought or not
-
How to invest in undervalued gold minersThe surge in gold and other precious metals has transformed the economics of the companies that mine them. Investors should cash in, says Rupert Hargreaves
-
Debasing Wall Street's new debasement trade ideaThe debasement trade is a catchy and plausible idea, but there’s no sign that markets are alarmed, says Cris Sholto Heaton
