- Portfolios with exposure to U.S. stocks and bonds could be heading for a decade of lackluster growth, according to Morgan Stanley.
- Emerging Asia stocks offer a sound alternative as economies like India, South Korea, Singapore, Malaysia and Thailand have more to offer investors.
- MSCI AC Asia Pacific ex Japan Index has generated gross returns of more than 356% October 2004.
Faced with diminishing growth prospects at home, investors in the United States and Europe are increasingly looking to Emerging Asia to grow their portfolios. The region has experienced miraculous growth over the past 40 years and the trend is set to continue beyond 2020 as the sun begins to set on Wall Street’s decade-long bull market.
Even if you don’t believe U.S. markets are headed for a major meltdown, it’s tough to argue that investors are buying American assets for all the wrong reasons. Last time we checked, buying assets because ‘there is no alternative’ doesn’t constitute a sound investment strategy. But that’s exactly what’s happening with U.S. stocks and bonds.
A Grim Future for Wall Street, Europe
Brexit, central-bank intervention and a never-ending ‘growth recession’ have made advanced industrialized nations less appealing for investors. Now, analysts at Morgan Stanley say these markets will offer diminishing returns over the next decade.
Over the forecast period, the analysts said a basic 60/40 split between U.S. equities and bonds will yield an average annual return of just 2.8%. That’s barely enough to stay ahead of inflation, which is targeted at 2% annually in most advanced industrialized nations.
The analysts also claim that Wall Street has a way of overestimating annual earnings – something that will come back to haunt portfolio managers in the future as profits fail to match expectations.