Investors are far too bearish, and U.S. equities could move 8 percent to 10 percent higher this year, according to the CEO of Emergent Asset Management, David Murrin, who added that Europe’s focus on fiscal austerity is proving “disastrous.”
“Right now, markets are oversold and we’re going to have a risk-on phase,” he told CNBC’s “European Closing Bell.” Murrin expects a rally in shares in Europe as well, but not as much as in the U.S. He added that he doesn’t see the high reached by the Stoxx Europe 600 on March 16 being breached.
Murrin said the recent flight among investors to safe-haven bond markets has been overdone, and said that investors holding those positions are “very vulnerable.”
“The Johnny-come-latelies are perhaps entering for the last bit,” he said, “but actually the yields here don’t make any sense.”
Like many investors, Murrin is skeptical about the way Europe is handling its debt crisis, calling the policy of austerity “disastrous.”
“Unless you catalyze growth and you get yourself above 4 percent to counter import inflation , you have negative real growth,” he said, “and you can’t hold Europe together with negative real growth.”
Murrin’s biggest fear, he said, is that if Europe and the Western world continue down a no-growth path of austerity, the growth gap between the developed and the developing world will widen. He’s particularly concerned about the rise of China.
“One of the problems in decline is that you focus inwards, and you fail to notice what is going on outside your borders. How we defend ourselves against some of the challenges of the arms race of China, which we’re completely forgetting and we don’t talk about,” Murrin said.
The U.S. is well aware that it is in the middle of an arms race, he said, and thus is more oriented toward using its economy as a defensive mechanism.
Of course not everyone agrees with his assessment. Some technical analystsbelieve stocks are positioned for further selling.
—By CNBC’s Jeannie Clarke
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Disclosure information was not available for David Murrin or Emergent Asset Management.