Saturday, November 3, 2012

U.S. stocks are investors’ best bet

NEW YORK (MarketWatch) � Investors may have a decent opportunity to make money right under their noses and they don�t want to hear about it.

I�m talking about U.S. stocks, which have very quietly put up decent numbers. I�m not talking shoot-the-lights-out returns; if that�s what you�re looking for, you really need to get a grip.

Click to Play Obama on insourcing American jobs

The president spoke at the White House with business and labor leaders, arguing that the time is ripe for bringing jobs back to America.

But those few investors who have stuck it out in U.S. equities have managed to do OK over the last couple of years and certainly much better than those who took fliers in �sure growth bets� like emerging markets.

Read Howard�s 2011 column on why emerging markets have had their day in

Only U.S. Treasury bonds are hated more, and they were by far the best performing asset class last year. �The entire market has been wrong about fixed income for the last five years,� says Jay Kloepfer, director of capital markets and alternatives research at Callan Associates in San Francisco.

Callan is the creator of the well-known Periodic Table of Investment Returns, which shows graphically which asset classes were the best and worst performers every year.

The firm hasn�t published its latest version (including 2011) yet but preliminary data suggest U.S. stocks ranked near the top last year. The Standard & Poor�s 500 index just about broke even in a year when markets like China�s lost 20%.

Now before you start firing off comments, let me assure you I don�t work for Wall Street, the mutual fund industry or the U.S. government, and I don�t make money if you follow my advice.

But I happen to think investing in U.S. stocks is a good idea for any U.S.-based investor who wants to grow his or her nest egg. And though I don�t recommend a big stock position for anyone (no more than 50% of your assets), I would keep two-thirds of your equity holdings in U.S. stocks.

U.S. economy not so bad off

Why? Mostly because the U.S. economy isn�t as bad as so many people think it is. Yes, unemployment is going to remain high for years to come, and that will hurt a lot of people. But investing is all about change, specifically the direction of that change, and from that standpoint the economy and employment are moving in the right direction.

We�ve had private-sector job growth for 22 consecutive months, manufacturing is rebounding and consumer spending is pretty strong.

�The U.S. economy is improving. It�s improving very slowly,� says Richard Bernstein, former chief investment strategist for Merrill Lynch who is now CEO of Richard Bernstein Advisors in New York. �Ultimately the trend is in the U.S.�s favor.�

Bernstein has preferred U.S. equities to emerging-market stocks for some time. In fact, he says the S&P 500 has outperformed the BRICs (Brazil, Russia, India and China) over the last four years, from 2008 to 2011.

U.S. companies are starting to bring jobs back to the U.S. because the total costs of making goods here are lower and the American work force is so productive. Last week the Wall Street Journal reported that wage and benefit costs at a Caterpillar plant in Illinois are less than half of what they are at another plant across the border in Ontario, Canada.

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