In the U.S., money growth is “spot on” the long-term average of 7 percent, he adds.
Moreover, emerging market growth expectations have been habitually too optimistic, Bernstein says.
Over the past several years, 55 to 60 percent of emerging-market companies have had negative earnings surprises, versus 25 percent in the U.S., he says.
“The expectations are too high,” he says. “People refuse to believe that growth prospects are not what they thought.”
Taking a slightly different view is James Montier, a member of the asset allocation committee at Jeremy Grantham’s GMO LLC. GMO has a baseline forecast of 6.2 percent growth for emerging markets, he says.
A “faction” in GMO thinks that baseline might be too high because of the Chinese real estate market and the financing issues there, which he says seems to be similar to what happened in the U.S.
Montier was on the panel with Bernstein and Michael Mendelson, portfolio manager of risk parity strategies at AQR.
Montier says there are value prospects in Europe, but the “the cheapest stuff is indistinguishable from the junk.”
Bernstein and Mendelson are still wary of Europe, although Bernstein says he’s watching the continent closely.
“As the pain gets worse in Germany, the more bullish we get on Europe,” Bernstein says.