If history is an accurate guide, “Not Much” is the answer to this question.
Last week we sent our Purposeful Investing (Pi) course subscribers, the November 2020 ENR Asset Management Market Outlook (1). One key feature was some positive thoughts relating to the outcome of US election.
This issue of the Outlook says: For investors worried about how the stock market will fare in the event of a divided government, history shows equities tend to rise regardless of which party controls government.
From 1929 through 2019, one party controlled both chambers of Congress and the presidency in 45 of those years.
The S&P 500 Index on average rose 7.45% during those years, according to Dow Jones Market Data.
The index was up 30 times and down 15 times.
In the other 46 years when there was a split government, the index climbed 7.26% on average, rising 29 times, falling 16 times and remaining unchanged once;
According to Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, stocks have performed better under Democrats.
Since 1900, $10,000 invested in the Dow Jones Industrial Average only when Republicans were President would have grown to about $100,000 (4% annualized). The same $10,000 would have grown to nearly $430,000 if it were invested only when Democrats were President (6.1% annualized return).
The Outlook also upgraded Asia and emerging markets to BUY in November because Asian stocks are outperforming the United States by the most in ten years, according to Bloomberg and Rosenberg Research.
Asia, where markets may be rising more
With the US stock markets exhibiting extreme volatility, we need international alternatives to balance our portfolios.
Once a quarter we send out Purposeful investing subscribers (Pi) a 52 page report prepared by Keppler Asset Management that looks at the value and performance of every emerging stock market in the world. Here are short excerpts of the emerging markets report for the autumn of 2020.
The report shows the values of the ten best value emerging markets.
We can compare these values to the high cost of the US and other overpriced markets.
Investing in a spread of the top value emerging markets at a price-to-book of 1.31 paid an average dividend of 3.78% compared to 1.63% from US markets. Pus the price-to-book for US shares is 3.96 more that three times higher than the average price-to-book for the top value emerging markets.
Plus investors who ignored overseas markets lost out!
Through September 2020, the US market was up 6.8%. The Taiwan market was up +14%, India +12.3.1%, China +12.0%,
After suffering one of their worst quarterly returns for the last thirty years in the first three months of this year, emerging markets equities recovered strongly.
Following double-digit returns in the second quarter, the MSCI Emerging Markets Total Return Index (ND) climbed another 9.6% in US dollars.
Year-to-date, however, the MSCI EM TR Index is, in US dollars down 1.2% in the first nine months.
Among the three regional indices, Asia advanced 10.6%, while Europe, Middle East and Africa (EMEA) gained 2.5% and Latin America was down 0.9%.
Year-to-date, Asia fared best, gaining 8.0% thanks to the good performance of China, while EMEA fell 10.5% and Latin America declined 17.4%.
Thirteen markets advanced last quarter, and also thirteen markets were down. Taiwan (+14%), India (+12.3.1%) and China (+12.0%) had the highest total returns last quarter, while Thailand (-11.9%), Hungary (-10.6%) and the Czech Republic (-8.6%) performed worst.
Year-to-date, however, only three out of the twenty-six markets included in the MSCI EM Index recorded a positive return.
The Top Value Model Portfolio gained 3.0% in US dollars last quarter.
There were no changes in Keppler’s country ratings last quarter. The Top Value Model Portfolio continues to hold ten markets—Brazil, Chile, China, Colombia, the Czech Republic, Korea, Malaysia, Mexico, Russia and Taiwan—at equal weights.
According to Keppler’s analyses, an equally weighted combination of these most attractively valued markets offers the highest expectation of long-term risk-adjusted performance.The table below shows how the Emerging Markets Top Value Model Portfolio compares to selected indices as of the end of September, based on important variables (current numbers for book value, 12-months trailing numbers for the other variables—no forecasts).
According to Keppler’s analyses, the asset class Emerging Markets Equities is now undervalued by 24% compared with the MSCI World Index of the developed markets.
Moreover, the Emerging Markets Top Value Model Portfolio is undervalued by 28% compared to the MSCI Emerging Markets (Standard) Index, by 45% versus the MSCI World Index and by a whopping 61% compared to the MSCI EM Growth Index.
Therefore, the outlook for superior performance of emerging markets equities in general and the Emerging Markets Top Value Model Portfolio in particular, over the next three to five years, remains very favorable.
Note: Due to liquidity issues and geopolitical risks, Keppler assigns lower than equal weights to smaller markets in the portfolios they advise.
We live in a global economy and to keep our investments balanced with the world, we should keep a continual watch on value in all stock markets and look for international as well as local equity opportunity.
Gain Safety, Profit & Get Paid Double
The stock market has always been the best place of places to protect and increase wealth over the long haul. Yet it’s also been the worst place to lose money, a lot of it, quickly.
There are only three reasons why we should invest. We invest for income. We invest to resell our investments for more than we had invested. We invest to make our world a better place.
The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!
We should not invest in social networked protests that guarantee loss either. This is like burning our houses down in protest.
If we want to change the world, we should invest in good equities that bring profit and use the extra wealth to create something beneficial for mankind.
We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.
This is why my core stock portfolio consists of 16 shares and this position has hardly changed in five years. During this time we have been steadily accumulating the same Top Value ETFs and have traded only a few times.
The study below shows a value based model portfolio that dates back to 1969 dramatically outperformed the US Market and almost every stock market in the world.
Over 51 years the Top Value Strategy (with dividends reinvested) appreciated 12.5% per annum compared to the 10.74% for the Dow Jones industrial Index (with dividends reinvested). This is a 1.76% per annum difference. This may not seem like much, but in the long term the difference is huge. 12.5% increases $10,000 to $4,062,362.22!. 10.74% turned the Dow’s $10,000 into $1,817,734.62 in 51 years.
No matter how we look at it, over time, value investing always wins!
Our portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi). I call these shares my Pifolio. The course shows how to use the value analysis of Keppler Asset Management to create a portfolio of ETFs that cover undervalued stock markets. I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.
In my opinion, Keppler is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage billions of dollars in funds. However because Keppler’s roots are in Germany (though he lives and operates from New York) all of his funds are registered for the European Union citizens, Americans cannot normally access his data.
I was lucky to have crossed paths with Michael over 25 years ago, so I am one of the few Americans who receive this data so I can share it with Pi subscribers.
The Pifolio analysis begins with Keppler’s research that continually monitors 46 stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. Keppler looks at these numbers and takes market’s history into account.
Michael Kepler CEO Keppler Asset Management.
Michael’s analysis is rational, mathematical and does not worry about short term ups and downs. Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) markets.
This is an easy, simple and effective approach to zeroing in on value. Little time, management or guesswork is required. You are investing in a diversified portfolio of good value indices.
A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment. This eliminates the need for hours of research aimed at picking specific shares. It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries. Investing in the index is like investing in all the shares in the index. You save time and gain incredible diversification because all you have to do is invest in the ETF to gain the profit potential of the entire market.
To achieve this goal of diversification the Pifolio consists of Country Index ETFs.
Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that track an index of shares in a specific country. ETFs do not try to beat the index they represent. The management is passive and tries to emulate the performance of the index.
A country ETF provides diversification into a basket of equities in the country covered. The expense ratios for most ETFs are lower than those of the average mutual fund so they provide diversification and cost efficiency.
Here is the Pifolio I personally held at the beginning of 2021. There have been no changes since.
70% is diversified into Keppler’s good value (BUY rated) developed markets: Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.
30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: China, Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.
There is one trick Pi subscribers learn about China which is different from the rest of the funds.
iShares Country ETFs make it easy to invest in each of the MSCI indicies of the good value BUY markets.
For example, the iShares MSCI Germany (symbol EWG) is a Country Index ETF that tracks the investment results of the MSCI Germany Index. The fund invests at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.
iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.
There is an iShares country ETF for every market in our Pifolio.
This year I celebrate my 53rd anniversary of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.
How you can create your own good value strategy.
Stock and currency markets are cyclical. These cycles create extra profit for value investors who invest when everyone else has the markets wrong. One special part of your course looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.
The effect of war cycles on the US Stock Market since 1906.
Bull and bear cycles are based on cycles of human interaction, war, technology and productivity. Economic downturns can create war.
The chart above shows the war – stock market cycle. Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet. The military technology shifts to domestic use. A boom is created that leads to excess. Excess leads to correction. Correction creates an economic downturn and again to war.
The next four years will be a period of high overseas stock growth.
The chart below shows the last 26 years of real-time forecasting by the global equity analyst we track to make our portfolio decisions.
The analyst is Keppler Asset Management and the index they create The KAM Equally Weighted World Index is 15.4% below the value that the analyst forecast four years ago in September 2016.
The chart shows how in the past, two and a half decades there have been four opportunities (red Xs) when the entry levels in global markets were below or around the lower valuation band. In the previous three low points like this, there has always been the highest growth and positive returns three to five years later.
So it’s good to know that if you invest in global stock markets overall, now, you’ll make capital gains over the next four or five years.
More importantly you get paid more income now!
Current markets have turned economic history upside down. Normally bonds pay the highest interest rates and add safety to a portfolio. Not in recent years!
The standard now is that equities have been paying a higher yield than bonds.
Top value stock markets (shown below) pay higher dividends. That’s one of the main reasons they are considered top value. They improve diversification, give the best long term profit potential, and as the chart below shows, pay almost twice the the average US dividend yield.
Plus Value ETFs are Safer
The people who dominate stock markets include a pack of thieves. This fact has always been true.
Shares in stock markets are manipulated all the time. Stock markets (in fact almost all types of markets) are led by sharks plain and simple. Count on this fact. This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.
A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.
Our Purposeful Investing Course (Pi) strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.
Manipulators have a hard time tricking an entire market, especially larger markets. If you get the best value country ETFs, your chances of long term profits improve.
Pi teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required. You are investing in a diversified portfolio of good value indices.
Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares. Investing in an index is like investing in all the major shares of the market. You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.
Here’s how you can create your own good value strategy.
I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets). This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.
This year I will celebrate my 53rd anniversary of global investing and writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.
Time is your friend when you use a good value strategy. The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.
A 45 year portfolio study shows that holding a diversified good value portfolio (based on a good value strategy) for 13 month’s time, increases the probability of higher performance to 70%. However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.
Save $124.50 If You Act Now
The global recovery from the pandemic is going to take years, so we have not only lowered the inital fee for the course, we have reduced the subscription to just $99 a year rather than $299. Your subscription will be autorenewed in a year at $99, though you can cancel at any time.
Enroll in Pi. Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past five years right away, plus numerous updates over the next year.
#1: I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.
#2: I guarantee to send you monthly updates that are based on a study of every share in 46 stock markets around the world. These updates will show the values, the earnings of all these markets and categorize each market as Top Value (buy), Neutral Value (hold) or Poor Value (sell)
#3: If you are not totally happy, simply let me know. I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.:
You have nothing to lose except the fear. You gain the ultimate form of financial security as you reduce risk and increase profit potential.
When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last five years so you can back track if you desire. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
Subscribe to a Pi annual subscription for $174.50 and receive all the above.
Your subscription will be charged $99 a year from now, but you can cancel at any time.