FA Magazine March 2023 - Page 22


Evan Simonoff

Markets And Asset Plays Reverse Directions

Shareholders are going to have to play by different rules in the coming years .


OST MARKETS RALLIED IN JANUARY AFTER A MISerable 2022 , but few look attractive . With sentiment souring around the world , the topic of where to invest is worth a contrarian examination .
Of the 16 asset classes tracked by Research Affiliates , only one , commodities , was up last year , according to the firm ’ s co-founder , Rob Arnott . Like many others , he believes U . S . equities remain overvalued . Yet this nation remains an island of stability beset only by spy balloons , UFOs and internal squabbles .
In contrast , Europe has a full-scale war on its border , Asian nations are trying to determine what an ambitious China ’ s next move will be , while South America and Africa have their own set of problems . One reason America remains the world ’ s safest place to invest is geographic isolation . Moreover , the possibility of a war breaking out in Canada or Mexico or the chance of China establishing military operations on a collection of rocks off Catalina Island or Martha ’ s Vineyard seems remote . But valuations matter , and it ’ s now clear U . S . stocks were severely overpriced 14 months ago .
The Worst Didn ’ t Happen
It ’ s worth recalling that the consensus in early 2022 was that the U . S . would have a mild recession and Europe could suffer a near-depression . So far , neither has happened .
“ Last fall , the fear factor was getting pretty intense ,” Arnott says . “ We never got to peak fear in the U . S ., but Europe and emerging markets did .”
The idea of thousands of Germans