THICK AS A BRIC – U.S. Stocks Outperform Star E.M.s

To the surprise of many, the U.S. stock indices are set to outperform those of the beloved BRICs in 2010.   As of December 23rd, China and Brazil are down for the year with the Russian RTS the top performer, up 22 percent.   India’s SENSEX is up 14.4 percent.  The BRICs are struggling with inflationary issues, some, of which, are caused by massive capital inflows in search of higher yields.

We find it ironic, given all the sound and fury of currency wars during the year, the Yuan, Real, and Rupee have only appreciated 2.5 percent against the Dollar this year, while the Ruble has slightly depreciated.   It almost appears Brazil and India have pegged their currency to the Yuan with almost no change in their cross-rates.   China may find it easier to fight inflation by allowing a faster appreciation of their currency next year.   That is how we’re leaning and it will be initially viewed as positive, though we won’t like paying the higher prices at Costco and Walmart.

The Russell 2000 has returned 26 percent, the Nasdaq, 17.5 percent, and the S&P500 up almost 13 percent.   The performance of the U.S. indices is a testimony to the high quality and adaptability of a well managed corporate sector and, yes, even to the aggressiveness of policymakers in addressing the virulent issues that have infected the economy.   It’s way too early to even think about taking a victory lap, however.   Let’s hope and pray the politicos begin to work on the structural problems plaguing the economy and to tackle the deficit and debt overhang before it tackles the markets and tanks the global economy.

All in all, not an easy year.  Those who lived the words of Jethro Tull, Really don’t mind if you sit this one out, missed quite a ride and are now scrambling to catch up.

Merry Christmas, Happy Holidays, and a Healthy and Prosperous 2011 to all our friends (and enemies) around the world!

This entry was posted in BRICs, Charts, China, Currency, Equities, Uncategorized and tagged , , , , . Bookmark the permalink.

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