Barry Ritholtz of Fusion IQ and The Big Picture blog says he’s dialing back a bit on U.S. stocks, and making bigger pushes into two unloved areas of the market: emerging market stocks and European stocks. “[Emerging markets] are the cheapest markets that are out there. They’ve gotten absolutely shellacked,” he says. “We love when markets get shellacked because it makes things attractive for long-term purchases [those with a 5 to 7 year horizon].” Ritholtz says he’s now at equal weight on U.S. equities, and is overweighting EM and European stocks. He’s investing in those areas through broad index funds that diversify risk over many countries, noting that many EM funds focus too heavily on the BRIC countries. Ritholtz also had this to say in a recent letter to clients: “Rather than focus on the headlines, which tell us only what has already happened, we are much more interested in valuations. Valuation trumps macro-tourism every time. Our asset allocation models are currently maintaining their weightings to Emerging Market equities, despite their recent unpopularity, and we are actively investing in Europe. We know this will require patience on our part, but we believe it will pay off over the long term. We feel that behavior, not a focus on the news of the day, is what separates good investors from the rest of the pack over time.”