U.S. stocks top BRICs by most ever on emerging market flight

More Certainty

Should the projections come true, it would mark a third year of faster earnings growth by American corporations, the longest run in data going back to 1995.

U.S. “earnings have delivered and there is more certainty going forward,” Andres Garcia-Amaya, global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in an Aug. 8 telephone interview from New York. The firm oversees $400 billion. “I’m OK paying up for more certainty, rather than having cheaper valuation while having a lot more uncertainty.”

JPMorgan Chase shares have rallied in 2013 as CEO Jamie Dimon led the company to record earnings over the past three years. Shares of the New York-based bank are trading at 8.4 times reported operating earnings and analysts’ estimates show the lender will boost profit by 9% in 2013, data compiled by Bloomberg show.

Higher Premium

Industrial & Commercial Bank of China Ltd.’s profit growth is projected to slow to 7% in 2014 from 8% this year, according to analysts’ estimates. The stock trades at 5.9 times earnings, near a record low, amid concern that an economic slowdown will increase bad loans and the government’s plan to loosen its grip on interest rates will hurt lending margins at the Beijing-based bank.

The U.S. economy will expand 3% in 2015, almost double from this year’s pace, according to the median estimates of 89 economists compiled by Bloomberg. Over the same period, combined gross domestic product in BRICs will stay the same at a growth rate near 5.9% and the Chinese economy will decelerate to 7.2% from 7.5%.

“That really creates an inflection point,” Jerry Braakman, the chief investment officer of First American Trust in Santa Ana, California, said in an Aug. 13 phone interview. His firm oversees $1 billion. “China hasn’t fallen off the wagon yet, but it’s getting dangerously close and that’s what scares people. If you’re trying to hide away from that Chinese impact, then buying U.S. assets might be a safety net.”

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