For months I’ve been saying that I think the U.S. stock market will be the best performing stock market in the world for the first half of 2011. And the U.S. stock market has obliged. In 2011 as of Friday, March 4, the iShares MSCI Emerging Markets index (EEM), for example, was down 1.2%. Brazil’s market, as measured by the iShares MSCI Brazil index (EWZ), was down 2.18% for 2011. The iShares FTSE China 25 index (FXI), among the best performing China indexes, was up 0.81%.

The U.S. Standard & Poor’s 500 stock index was up 5.4% for 2011.

No contest.

In more recent weeks, I’ve also warned that while I think the outperformance of the U.S. market is likely to continue for a while, it’s no time to get complacent. See my post from February 8 http://jubakpicks.com/2011/02/08/u-s-stocks-will-outperform-the-rest-of-the-world-in-my-opinion-for-the-first-half-of-2011-but-dont-forget-that-first-half-part/ .

And today I’d like to go one step farther and say that it’s time to think about strategies for rotating out of U.S. stocks and into emerging markets again. Read more

Is the violence in Libya the last straw for the world’s emerging economies? Or at least for investors in those markets?

I certainly think that the big drops in emerging market stock markets are leading some investors to abandon markets that they never felt all that comfortable with in the first place.

For those of us—and I do mean us—who do believe in the long-term emerging markets story (and I wouldn’t have started a global mutual fund if I didn’t), it is still important to acknowledge that what we can call the Libya crisis for short has increased the medium term—say the next six to nine months–risk of these markets.

How come? Higher oil prices are a big problem.

Yes, I know that Saudi Arabia has lots of excess oil capacity and has pledged to pump to meet any losses from Libya. I know that it’s likely that once the Libyan crisis is over oil prices will retreat from current levels so that the world is probably not looking at $110 a barrel oil as the new base price. (I argued all this in my post http://jubakpicks.com/2011/02/23/its-still-a-little-early-in-the-libya-crisis-for-bargain-hunting/ )

And I know that the worries of the moment have concentrated on the world’s developed economies, especially Europe, which is very dependent on oil and gas supplies from Libya. The worry here is that higher oil prices—and Brent crude traded at $111 a barrel on February 23—will stall the weakest economies in the European Union. (A rule of thumb among economists is that every $10 increase in the price of a barrel of oil cuts GDP growth by half a percentage point within two years.)

But higher oil prices, even modestly higher oil prices, couldn’t come at a much worse time for emerging economies where governments are waging a tough battle to control inflation without tipping their economies into a big slowdown.

That balancing act, already difficult, got much, much harder with Libya. Read more

Trying to put a price on fear

There’s short-term panic and long-term fear.

Both are at work in the financial markets this morning. The common factor, of course, is Libya, where Muammar Gaddafi seems determined to fight for control to “the last man standing” in the words of his son Seif al-Islam. Libya pumps about 1.6 million barrels of oil a day (making it the eighth largest OPEC producer)—or at least it did before protests calling for an end to Gaddafi’s 40-year dictatorship sent Western oil companies scrambling to evacuate their employees.

Short-term panic has sent prices for West Texas Intermediate crude oil as high as $94.49 a barrel, the highest since October 2008, in New York this morning. Brent, the European oil benchmark, climbed to $108.57 in European trading. (Libya is a major source of Europe’s oil. The United States is not a big importer of Libyan oil.)

Gold advanced another 1.1% as of 9:30 this morning after climbing 1.2% yesterday. Silver was up 3.8% on Monday and has moved up another 3.1% today.

When nobody knows what’s going to happen and when the worst of possible outcomes all seem possible, markets tend to swing to extremes. Read more

Are you in the right sectors of the stock market for this point in the economic recovery?

Solid data stretching back to 1945 show that certain industries and sectors outperform during specific stages of any economic recovery.

No argument from me on that. I think investors should do everything they can to put the economic cycle behind their portfolios.

Just one little question: Where exactly are we in the economic cycle? And in the new global economy does it any longer make sense to think about over or underweighting sectors just on the basis of where the U.S. stands in the economic cycle? Read more

How did the stock market do in 2010?

Depends.

Which stock market are you talking about?

The United States–where the Standard & Poor’s 500 stock index climbed 15%–or Spain—down 19% for 2010?

China–where the iShares FTSE China 25 was up just 3.5% for the year—or India—up 21% for the year?

Chile—up 47%–or Brazil—up only 8%?

Last year, like most years, how you did as an investor depended very much on where you did your investing.

So in 2011 what are you going to do about it? Invest in the world’s best stock markets, of course. And today I’m giving you my take on how to separate the best from the rest in 2011. Below you’ll find my five picks on stock markets to overweight in 2011. Read more