Chris Wood, a prominent figure at Jefferies, has made a substantial prediction about the future of US stocks. He urged investors to diversify their portfolios by incorporating assets from China, India, and Europe. Wood emphasized that while US stocks have been a cornerstone for portfolios, the shifting economic landscape and growth potential in other regions necessitate a broader investment strategy.
He suggested that emerging markets, particularly China and India, offer significant opportunities for growth that investors should not overlook. This advice comes as global markets continue to navigate a post-pandemic economy, with varying recovery rates and economic policies playing crucial roles in shaping investment outcomes. Wood believes that by looking beyond US borders, investors can create more resilient and profitable portfolios.
Such diversification can protect against localized economic downturns and benefit from the rapid growth seen in parts of Asia and Europe. This strategy aligns with the broader trend of global investing, where exposure to multiple markets can mitigate risks and enhance returns. In a recent podcast, Wood highlighted that India is currently in a position similar to China at the beginning of the 21st century.
He pointed to India’s GDP per capita growth and its dynamic entrepreneurial culture as key factors driving his positive outlook.
Diversify portfolios with Indian assets
“For the last 20 years, I’ve been saying that the best market to own in emerging markets globally is India.
India is now in a position similar to China was at the beginning of this century in terms of demographics and GDP per capita, combined with a very dynamic entrepreneurial culture. There are a huge number of interesting companies in India,” said Wood at the Money Maze Podcast. Wood also flagged the US stocks as a growing risk of a “waterfall decline” due to increasing trade tensions and policy missteps.
“While there is potential to generate new positive momentum by dramatically scaling back tariffs and refocusing on tax cuts and deregulation, the base case remains the US underperforming other stock markets amid a weakening US dollar and a bearish Treasury bond market,” he noted. In his Asia Pacific ex-Japan relative-return portfolio, Wood recommended reducing weightage in Taiwan by 1 percent to increase investments in the Indian market. “The weighting in India will be increased by a further one percentage point by shaving further the weighting in Taiwan,” said Wood in his note to investors.
The US Treasury bonds are often piled up by investors during times of crisis, resulting in a decrease in yields and a stronger US dollar. However, Wood pointed out an unusual scenario occurring now where risk-off actions are happening alongside a weakening dollar, a combination not seen in the past 30 years. In conclusion, Chris Wood’s recommendation to diversify portfolios by including assets from China, India, and Europe is a strategic move to capitalize on growth opportunities and safeguard investments against economic uncertainties in the US market.
Investors should consider reallocating their portfolios to capture potential gains in these markets, according to Wood.
