, among others, were the winners in a low interest rate environment, Mr. Kletz says value stocks will have their turn now as interest rates rise, and inflation steadies at a higher-than-normal rate.“In doing so, it makes sense to either go toward a more value sector orientation in the U.S. or go toward international markets, like Europe and Asia, which in general … have more of an orientation toward value stocks that would tend to perform better in this type of economic environment.
While he tells investors to stick to broader regions instead of choosing individual countries, China is an interesting case right now, he notes.“They’re almost running completely counter to what you see in the U.S. and other [countries],” he says. “Just from a diversification standpoint alone, it’s a really interesting play for policy diversification, but also for Chinese stocks, which tend to be very much pro-policy driven.
However, Mr. Kletz is avoiding stocks in Eastern and Central Europe as well as those in some Asian nations as they haven’t begun to raise interest rates to tame inflation. “Performance has been dismal, absolutely horrific for fixed income across the board, whether it’s high yield or investment grade,” he says. “But if you invest now in fixed income, you’re picking up those higher yields.”
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