Time to bet on India: Wells Fargo's Jacobsen

Easing into emerging markets
Easing into emerging markets   

Oil, China and the Middle East were the cause of market fears for investors at the beginning of the year, but these elements might now be the market's catalyst for growth.

Over the weekend, China said the chairman of the China Securities Regulatory Commission, Xiao Gang, had been ousted. His removal came after his policies faced backlash for allegedly sending the country's market into a volatility spiral.

In addition, market concerns eased on last week's talk of an output freeze from oil-producing countries and Baker Hughes reporting continuous declines in crude rig counts, and a report Monday in which the IEA forecasts U.S. shale production could decline a whopping 600,000 barrels per day in 2016.

This news encouraged U.S. stocks to trade higher Monday and oil to rally.

Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds, suggests that commodities are finding a bottom and that the Federal Reserve won't be raising interest rates too fast this year, so investors should ease into emerging markets.

"Outside of America, I would put India up there as being one with the most opportunities … [and] emerging Europe," he said, adding that India's release of its budget at the end of February could be a catalyst for that country's stocks to reprice higher.

"One of the reasons why India got dragged down with a lot of other emerging market economies was because it had the label 'emerging market' on it," he contended. "It's a fast-growing economy, it's more service oriented and should benefit from the commodity trade."

While Jacobsen is fond of emerging markets, market watchers remain concerned with global growth, despite current stabilization signals.

The strategist thinks, however, that the U.S. has a 14 to 15 percent chance of entering a recession, and that global growth fears are tied to declining commodity prices and austerity policies in Europe.

"If those headwinds are beginning to no longer be headwinds, they don't necessarily have to become tail winds," he said Monday. "I think that the economy can accelerate from this point forward."