Even BRIC-progenitor Jim O’Neill says developed markets, especially the U.S., will outperform emerging markets this year, according to Money Control.
The head of Goldman Sachs Asset Management expects the S&P to go up 200 points this year. Meanwhile, India’s Sensex is down almost 9% this month after a stellar 2010.
O’ Neill told Money Control he thinks inflation is more obvious in China, but investors are antsy about India:
“It is not obvious where the Indian policymakers are so people are worried about what kind of inflation level will be tolerated and how aggressive the Indian policymakers are going to be.”
and later added:
“India did so well throughout much of the second half of last year. A period of correction was pretty obvious.”
Instead, he sees capital flows into the U.S. markets this year:
“The US market looks cheap, there is a lot of momentum and there are a lot of positive changes taking place in the economic data. I think we look set for an extended rise in the US market, so I feel very good about it.”
Revised numbers suggest that investors have pulled $849 million out of Indian markets in January alone, according to Reuters. In fact, the MSCI’s emerging markets index is down 0.7% this year, and the Dow has been up 3.5% in the same time frame.
O’Neill predicts that Indian markets will round off 2011 on a more positive note but expects the first few months to be fairly turbulent. In the long term though, he continues to be bullish on emerging markets, or growth markets, as he now calls India and China.