When he talks, one must listen. Rich Bernstein is CEO of Richard Bernstein Advisors, and former Chief Investment Strategist and Head of Merrill Lynch’s Investment Strategy Group. We have mentioned him a few times here as he is an “out-of-the-box” thinker when it comes to investments. His latest newsletter is very insightful, and we strongly recommend it for your weekend read.

Some of his comments:

Fundamentals might not determine 2012’s investment results. With governments intervening in many economies, it certainly seems like global politics, rather than fundamentals, might determine 2012 outcomes. We’ve seen politicians questionably intervene not only in the US, but also in Europe, in Brazil and in China.
If fundamentals rule, then we think 2012 will be another year of US asset outperformance. This remains a very out-of-consensus view but, as we have repeatedly pointed out, the US dollar index (DXY) troughed in April of 2008, and the S&P; 500 has been outperforming the MSCI BRIC Index for four years. Investors still consistently flock to the highest quality asset in the world, US Treasuries, when market volatility increases.

Some of our favorite investment themes for 2012 include:
• Overweight of the US equity market, and underweight of emerging markets.
• Overweight of smaller US stocks, with an eye for smaller, domestically-oriented financials.
• Underweight commodities and gold for US dollar investors. Overweight for EM-currency investors.
• Positions in treasuries to maintain portfolio diversification.
• Increasingly avoid alternative assets.

Full report below explains each of the 5 themes.


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