Gameplan for 2014: Buy Europe and Emerging Markets

I’ve got some good news for you and some bad news. We’ll get the bad news out of the way first. Using the ratio of total market cap to GDP, the U.S. equity markets are looking expensive again. This metric — which is one that Warren Buffett himself claims to use as a general gauge of market valuation — suggests that U.S. stocks are priced to return a measly 2.1% per year going forward. The good news, however, is that many of my favorite international markets are priced to generate fantastic returns going forward. Spain — which I wrote about last week — is priced to deliver returns of 11.4%. Singapore is priced to deliver returns of 16.7%.
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