Bond Yields Vs. Stocks Vs. PE ratio

This chart shows how rising bond yields can impact high PE stocks. 

Buy Emerging Market Stocks in 2014

One of the reasons I'm bullish on emerging market stocks is because they underperformed the U.S. in 2013. But most importantly, the P/E ratio of these emerging market stocks is at all time lows (P/E=11), while the P/E ratio in the U.S. is at 22. This is a valuation of more than double the emerging market stocks.

PE ratio

I think this underperformance in EM stocks is due to the underperformance of the CRB index as compared to U.S. stocks, which can also be seen here. Stocks went up (yellow line), but the CRB index (orange line) went down.

Stocks Vs. CRB Index

I believe the CRB index is now in a recovery phase. China's power consumption has been steadily increasing.

China Power Consumption

That's why I'm bullish on emerging market stocks. If you're not convinced yet, don't believe me, listen to Peter Schiff.

To read more, go here.