Emerging Markets are 'Yesterday's Story': Bernstein

Investing in emerging markets has lost its appeal and investors should get behind the next growth area, Richard Bernstein, CEO of Richard Bernstein Advisors, told CNBC Tuesday.

"People tend to chase yesterday's story," Bernstein said. "They're doing it now with emerging market stocks, rushing into emerging market stocks after they've been outperforming for twelve years. The question is what's the next story coming up?"

Bernstein thinks the next big investment opportunity is small companies in the United States because they're "starved for capital."

Within the small-cap sector, Bernstein favors industrial and material companies and even some financial companies.

"Small financials I think are really going to be very key in making small business loans … getting the economy going again," he said.

The Federal Reserve is widely expected to continue to pump liquidity into the financial system in a bid to stimulate the economy and bank lending. But some market watchers claim that increased liquidity wouldn't feed through to increased bank lending because the demand isn't there.

"If anyone thinks that (quantitative easing) is going to encourage the banks to lend more out, well no-one wants to borrow it, which seems to be the fundamental point that people miss," Peter Toogood, head of investment at Old Broad Street Research, told CNBC last week.

Bernstein said he thinks that the dollar will remain under pressure in the near term, but then rebound over the coming years more strongly than people think. He added that investments overseas will likely bring disappointing returns, leading many investors to repatriate funds.