From The Reformed Broker:
... I've been asked to look out into 2012 and offer some ideas as to what may become the dominant themes of 2012. Here are three themes that I think could be big ones for investors next year...
The Return of EM - Emerging Markets (EM) stocks have been slaughtered in 2011, the MSCI EM index is down 22% versus a flat S&P 500. Some of this weakness can be attributed to European-driven slowdown fears (investors fled what they believed to be riskier markets), some attributed to tighter interest rate and lending policies as EM countries worked to stave off inflation.
EM stocks are now trading at a 35% discount to their mean price-to-earnings ratio going back 15 years. Weak holders have been wiped out and so have valuation premiums. EM countries from China to Brazil are now back in easing mode, with an interest rate cutting cycle just begun. The last three times EM countries began to cut (2003, 2005, 2008) represented incredible opportunities to get long.
In 2012, big money will say, "let me get this straight, I can buy stocks in countries with higher growth rates and better fundamentals and pay the same multiples as I do for crumbling, past-their-prime developed market stocks? Where do I sign up?"
What to expect...
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