The often gloomy Marc Faber of the Gloom Boom & Doom Report is bullish on European and Chinese stocks, and says that with an era of volatility on the way, stock-picking strategies could be a good way to beat the market.
“I think China stocks are quite a good buy,” Faber said at a recent meeting of hedge fund managers, according to MarketWatch, though he added that he would avoid shipbuilding and steel stocks. He also said that about four months ago he loaded up on European stocks “for the first time in my life”. He says he thinks “investors will look back at the European crisis today and think we should have bought equities in 2012.”
Some have said that poor recent performance by active managers is due to high correlations among and within asset classes and major government intervention in markets, and that the trend could continue. But Faber says things might not stay that way. The poor recent performance of hedge fund managers could actually be a contrarian indicator, he says. He expects increased volatility in markets going forward, and thinks active managers could take advantage of that.
“In this environment of negative real interest rates we will have a lot of volatility and there are two strategies you can use,” he says. “One is to aggressively shift from one asset class to another.” The other is to divide a portfolio equally among four categories: precious metals, equities, real estate and cash.