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CNBC PRO Talks

Seth Masters, who correctly called the bull market, says returns will be harder to come by ahead

Seth Masters, who oversees $80 billion in assets at Bernstein Private Wealth Management, predicts U.S. market returns will be much more difficult to achieve in the years ahead.

"After now about six or seven years of a very healthy equity market recovery, U.S. stocks are no longer cheap," Masters said. "Profit margins at U.S. companies remain at very elevated levels. It's hard to see how you get huge earnings growth or much more valuation expansion here in the U.S."

In contrast, Masters believes investors will need to turn their attention overseas for opportunities where better valuations and higher-growth potential still exists.

"It's going to be a little tougher to get good returns and manage risk in the years ahead. It was easier when the dollar was strong just to stay here at home. When you have stronger equity returns outside the U.S., but possibly weaker currencies, you need to have pretty nuanced strategies to take advantage of that," he said.

Masters famously predicted in 2012 that the Dow Jones industrial average would rise to 20,000 by 2018, a forecast that caused a stir because the blue-chip benchmark was around only 12,500 at the time.

In an extensive strategy session with CNBC's Mike Santoli, Masters reveals his outlook for 2017 and discusses:

  • How investors should position their portfolios in the months ahead
  • The investment principles that could drive returns in 2017
  • Equity allocations by region, and where to find opportunities
  • Investment lessons for every market participant
  • Fixed income strategies and how to protect one's portfolio against unexpected market swings.

PRO subscribers can also read the entire transcript of the exclusive interview below.