The Case for Stocks When They're Not Cheap

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Jan. 7 (Bloomberg) -- Janney Montgomery Scott Chief Investment Officer Mark Luschini previews today's markets and discusses his investment ideas with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Heard before that u.s. stocks are fully valued and there are still pockets of opportunity.

It is not a bad time to look overseas.

It's hard to find anybody to stick their necks out.

Many people say much of what you are saying.

That's true, it's a bit uncomfortable to be part of the consensus but sometimes the consensus is right.

As it stands today, we think it will be another rewarding year for risk assets, perhaps not on the same magnitude as 2013 but nonetheless, we think stocks will do better than bonds and cash and we are pivoting more money to international markets because valuations are more attractive there and we think the earnings growth profile for european-based companies is better than that in the u.s. one of those international areas that people have been talking about is europe.

Julie hyman has been looking at the investor sentiment on europe.

When you look at european assets, it's a popular area among investors.

I want to put the growth profile in perspective.

I was just talking with michael mckee who pointed out that one analyst was on bloomberg radio yesterday talking about you are going to have at least estimated rebound in gdp growth in the euro zone.

After a couple of declining years of gdp, you could see a aim.

It is to lackluster, a gain of one percent.

I also want to look at unemployment because that is key, not just to look at gdp, but unemployment and what it will be for consumer goods.

Even as gdp growth is improving, the on climate rate is actually picking up or expected to tick up in the eurozone to 12.1%. they say it remains steady at 12.1%. that raises some questions about consumer demand when you still have many folks who are expected to be unemployed.

Does that mean it might be too early to get into europe?

I don't think so.

A lot of that has already been baked into the valuations.

That's why they are so cheap compared to the united states.

If you look at the schiller p/e, it is 25. at the same time, you can find p/e's across developed core european-based markets of 15-17 whether you talk about the u.k. or germany or france.

If you are more adventuresome and want to go into the peripheral countries, you can find them at nine and 10. because of the fact that we have a modest level of growth in europe now after 18 months of recession, still high unemployment levels, still concerns about how this will all work out in terms of the aftermath of the financial crisis and the upcoming stress tests in europe, that is they can to valuations.

It does not take much of a change in earnings profile for european-based companies to show share price appreciation but also european taste equities and get the multiple expansion.

I think the markets are poised to do better than the u.s. in 2014. thank you so much.

Coming up, wisconsin republican

This text has been automatically generated. It may not be 100% accurate.


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