U.S. Equities are outperforming other asset classes in 2012 for the first time in close to 20 years.
Data provided by Bloomberg reveals that the benchmark S&P 500 Index has surged 14 percent in 2012, which means that the group of stocks has outperformed commodities, Treasuries, corporate bonds and equities in Asia and Europe.
The S&P has not displayed performance this robust since 1995, when it was enjoying its largest gain in the last 50 years. The benchmark index went on to surge another 93 percent in the following two-and-one-half years.
Regardless of the risk aversion that many investors are experiencing, some of the best assets are still U.S. companies, according to the news source. Market participants are afflicted with concerns about widespread joblessness and lackluster growth, but these firms have been experiencing strong appreciation.
Market optimists have been encouraged by a recent Federal Reserve announcement that the central bank will both engage in further quantitative easing and also wait until some point in 2015 before raising key interest rates, the media outlet reports.
“We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets,” Max King, a multi-asset strategist at Investec Asset Management in London, which manages $100 billion, told the news source. “This is a major green light for equities and the fact that people don’t see it, is great.”
Strong future performance
Equities will continue to enjoy a bull market for another year as market participants become less wary of risk and put their money back into stocks after withdrawing funds from these assets since 2007, Laszlo Birinyi, the president of Westport, Connecticut-based Birinyi Associates Inc., told the media outlet.
The statement of this market expert is supported by Investment Company Institute revealing that global market participants have withdrawn $100 billion from U.S. stock funds in 2012 while putting $250 billion into bond funds, according to the news source.
Birinyi, who was involved in equity trading at Salomon Brothers Inc. in the 1980s, told the media outlet in an October 17 phone interview that the aversion that investors have for the stock market is declining.
Bloomberg data indicates that the S&P 500 finished the week ending October 19 with a price-to-earnings ratio of 14.5, which is still relatively low compared to its 50-year average of 16.2.