Investing in the US Market: A Safer Bet?
Renowned short seller Carson Block has made a surprising statement: most investors would be better off buying the biggest US stocks rather than trying to find undervalued companies. This comes as the S&P 500 Index continues to hit new records, despite concerns over valuation.
The Power of Inflows
According to Block, inflows from retirement funds will remain a key driver for further gains, especially for the most heavily-weighted names. He believes that it’s better to “not think too much” and just invest in the top mega-cap stocks, referring to them as the “Magnificent Seven”.
A Change of Heart
Block’s comments are a departure from his usual approach as an activist short seller. He has looked back on his career and realized that he could have achieved similar results by simply investing in the S&P 500. This newfound optimism towards the top technology names has been renewed after a lackluster quarter.
The Rise of the S&P 500
The S&P 500 has just capped a sixth straight week of gains, thanks to solid corporate earnings and signs that the world’s largest economy is holding up. This has led to a slew of investors pouring money into the market, making it a safer bet.
A Word of Caution on China
However, Block remains skeptical about investing in China, citing issues with corporate governance, policy “capriciousness”, and geopolitical concerns. Despite a recent rally spurred by Beijing’s stimulus blitz, he believes that China is “uninvestable” in the medium to long term.
A Better Alternative
Instead, Block has turned his attention to Vietnam, where Muddy Waters has launched a long-only fund. He believes that Vietnam offers a more constructive investment environment, with a government that is more accommodating to foreign capital.
A New Era for Investors
As the US market continues to rise, investors are faced with a new reality. With inflows driving gains and the S&P 500 hitting new records, it may be time to rethink traditional investment strategies. For Block, the answer is simple: invest in the biggest US stocks and ride the wave.
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