Marc Faber: European Stocks Un-Hedged Could Outperform The US; Fed Won't Raise Rates This Year
Marc Faber, investor and publisher of the newsletter Gloom, Boom & Doom Report, was on CNBC Wednesday to share his views on U.S. equities versus European stocks, sovereign bonds and Fed raising rates.
"Well, basically at the present time about half of all sovereign bonds yield less than 1 percent," Faber said.
"And in Europe, we have next to zero interest rates in some countries...what is also interesting is that the sovereign bonds, the 10-year papers of Portugal, Italy, France and Spain all yield less than 10 years U.S. treasury notes," he added.
"In other words, the policies of central banks have grossly distorted financial markets and misallocated capital in my opinion."
European Equities Can Outperform U.S.
He continued, "In Europe I would see better performance of equities because many equities yield say 5 times more than sovereign bonds whereas in the U.S. the S&P and the 10 year treasury note I have about equal yield.
"So, I think that actually this year, European stocks un-hedged could outperform the U.S."
Fed Won't Raise Rates This Year
Faber was asked what will happen to markets around the world if the Fed starts raising rates in as early as June.
He replied, "In my view, it wouldn't be tragic for U.S. stocks. I think the financial markets will run or move according to lots of different factors -- not just the Fed."
He added, "In this particular instance, I have to say the Fed and other central banks would have to increase interest rates quite substantially to really knock off stock markets, but there is one point I would like to make: In my view the Fed will not increase interest rates this year because of the dollar's strength and...recent economic data has been rather disappointing."
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