The 'sell America' trade could be a costly mistake

The "promote The United States" change is gaining momentum as investors peep out of the country amid rising uncertainty in U.S. markets. Sam Stovall, chief investment strategist at CFRA, joined TheStreet to break down why staying away too long may effectively be a costly mistake.

Linked: Bond markets whipsaw amid 'promote The United States' change in safe-haven Treasuries

Full Video Transcript Below:

SAM STOVALL: Successfully, the promote The United States change, I judge is a response to the uncertainty associated with the tariffs. The truth that the S&P has done so effectively within the previous several years, outpacing each mid caps, small caps and worldwide stocks in 12 of the closing 15 years to the level the set up there are heaps of good-wanting valuations out of the country. And so I judge investors are rotating away from the US additionally because we hold now considered the S&P expertise sector post 30% will enhance or more in six of the closing eight years. That means that there may no longer be heaps of advance-term enhance potential. And so investors are having a peep in other locations for that enhance. I judge that a diverse portfolio has always been a fairly clear approach.

I arrangement judge, alternatively, that after this decline is over, we can acquire that investors rotate wait on into the areas of enhance. Historically, after a decline of 10% or more, that the market tends to buy into the three worst performing sectors and the 10% worst performing subindustries all the draw in which thru the decline and 365 days after the bottom of these 10 plus declines, it is these worst performers that have a tendency to outperform. So I would have a tendency to direct that you fabricate no longer wish to handle away for too long.

Successfully, the promote The United States pattern that we're experiencing good now, I judge, is more of a transient term phenomenon in phrases of the greenback. Ceaselessly, the set up else would investors scuttle? I point out, they're no longer going to be the instruct of the Chinese Yuan because the forex of option or the euro. No doubt, there isn't any longer any longer ample Swiss francs to steal over US's set up because the reserve forex of the realm. So I judge that does stop up being more of a transient term phenomenon. And I judge investors are going to scuttle for the enhance. And if long term, the stronger enhance in earnings will likely reach from U.S. companies, specifically tech, I judge there'll be a rotation wait on into these areas within the intermediate to long term.