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US Equities Will Be 'Rewarding' But 'Dangerous': Pro

Developing countries have underperformed in the last few weeks amid concerns over inflation, but Jim McCaughan, chief executive of Principal Global Investors, said the emerging markets are still a “buy.”

“Inflation is something to worry about for sure and it’s more important to emerging markets than here because for the emerging markets, food is like 30 to 40 percent of consumer spending and it’s nothing like that here,” McCaughan told CNBC.

However, McCaughan said he is “wary of being too short” of the emerging markets given the long-term strong growth story.

“The increasing prosperity in the emerging countries is not going to go away and it’s going to be cyclical,” he explained. “So a setback like this is an opportunity to buy.”

His U.S. Outlook:

McCaughan also said he sees a well-established economic expansion in the U.S., which should support a strong equity market.

“U.S. equities will be rewarding this year, albeit dangerous,” he said, recommending stocks in the S&P 500 and the Russell indices. “The mid-cap and small caps have done better in the last 2 to 3 years, but they haven’t done so much better that you should be abandoning them.”

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Scorecard—What He Said:

  • McCaughan's Previous Appearance on CNBC (Dec. 17, 2010)

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More Market Views:

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CNBC Data Pages:

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CNBC Slideshows:

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Monday's Dow Gainers (as of this writing):

General Electric

Walt Disney

American Express

Exxon Mobil

3M

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Disclosures:

No immediate information was available for McCaughan or his firm.

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Disclaimer