Fundamental indexing guru Rob Arnott says that to get bargains, you have to invest in places where fears are high. Right now, he says that means to look in places like emerging markets and Europe.

“I look at emerging market stocks and bonds as, in general, cheap–for the very simple reason that people are afraid,” Arnott tells ETF.com. “You don’t get bargains in the absence of fear. Those bargains are widespread in the emerging markets. Fundamental indexing in emerging markets currently carries a price/earnings ratio relative to last year’s earnings of nine-times earnings. That’s cheap for owning half of the world’s GDP.”

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“Does that mean they’re going to soar in the coming year?” he adds. “Of course not. There could be further troubles. The question is, will the fear be greater or less a year from now? If the fear dissipates even slightly, those stocks are likely to soar. Same thing applies to the bonds where the spreads are huge.”

Arnott says he’s not a”permabear”, as some claim. “I’m a permabear on stocks when they are very expensive,” he says. While US stocks are expensive, he says, stocks in other parts of the world are not. “Europe is priced to offer pretty good, long-term, forward-looking rates of return,” he says. “Emerging markets are priced to offer very good, long-term, forward-looking rates of return. For those who can stand the volatility and the maverick risk of being invested where their neighbours aren’t, with the risk that they can tolerant in a short-term bear market while their neighbours are minting money in a short-term bull market, that’s very uncomfortable.”