Why NOT To Invest in the US Stock Market
For many people, when they hear about investing, they immediately think about the US, but there are other opportunities.
Don’t get me wrong, I love US stocks but the overall US market has quite high valuations and has had loads of growth.
When we look at the last 5 years, the S&P 500 performed an outstanding 87% return. Compare this to the poor 2% gain from the Hong Seng Index and the 3% gain from the FTSE 100 in the same time period.
It looks like the recent growth in the US comes from the valuation multiples getting higher.
So in which economies should we invest
Bridgewater capital (Ray Dalio’s fund) recently compared the US economy with China’s. In their report, they mentioned that in the US, valuations are still relatively high, the central bank is tightening and there is no more stimulus. Whilst in China, valuations are lower, the central bank is lowering interest rates and they are giving out more stimulus due to Evergrande.
However, if we look at the bigger picture, the Hong Seng index is down 20% this year. But why? This is mainly due to Tencent and Alibaba getting fined for billions and more regulations by the communist party.
This makes investing in the Chinese Yen interesting. By investing in the currency, you profit from the economic growth whilst not being exposed to the uncertainty and volatility from the communist party.
If you think that we will come into a recession, then investing in a currency is a good idea. People flee to safe assets like currencies in times of a recession.
