Cat Paw Stealing Eggs From a Nest

United States asset managers are increasing their holdings in stock markets abroad, prospecting for havens that minimize the impact of the high interest rates and economic uncertainty plaguing equity prices at home, the Financial Times reported.

For example, PineBridge Investments, which manages $143 billion in assets, said in its most recent strategic statement that it has taken “a more cautious stance on broader U.S. stocks, particularly given today’s overvaluation teamed with the upcoming tightening of credit and risk aversion by banks.”

It also cited the U.S. Federal Reserve pulling its props from the bond market.

Investors have subtracted $34 billion from U.S. equity markets so far this year, while European markets have collected a net $10 billion in new investments, the FT said. About $16 billion has gone to Chinese stock markets.

“To some extent, investors are realizing that China is investable again,” portfolio manager Frank Brochin at the Colony Group told the FT.

Managers began transferring their money to foreign markets last year as equity prices began to slide.

Partly as a result, Europe’s Stoxx 600 index has posted greater returns than the Standard & Poor’s 500 index for the last four consecutive quarters, the first time it has done so since 2008, the FT noted.

Stock markets in China, Europe, and even in emerging nations will outperform U.S. equities for decades to come, the Blackrock Institute has predicted, although the U.S. remains the world’s largest stock market.

In recent years, U.S. markets’ stellar gains were powered disproportionately by tech stocks feeding on rock bottom interest rates. As rates rose, tech stocks fell into disfavor; higher rates crimp their cash flows and long-term earnings potential.

In contrast, Europe’s equities emphasize manufacturing, financial services, and commodities, all of which are impacted less by high interest rates. Investment funds also have learned that asset managers abroad have a better sense of their markets’ behavior and can be more nimble in timing transactions to maximize returns, Brochin added.

“They have a depth of understanding and knowledge of those markets that’s hard to reproduce,” he said.

TREND FORECAST: As Gerald Celente has long noted and as we detail in the ECONOMIC OVERVIEW in this Trends Journal issue, the 20th century was the American century but the 21st century will be the Chinese century. Why? Because the business of America for some 75 years has been war, while the business of China has—and is—business. The writing is on the Wall Street wall for all to see.

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