U-S-A! U-S-A! U-S-A! It’s a chant that all of us will surely hear regularly this month when American athletes compete at the Summer Olympic Games in Beijing. In that Olympic spirit, we would like to offer our own chant of U-S-A! U-S-A! U-S-A! -- for the U.S. stock market.

For the first time in this decade, we believe the U.S. stock market is primed to outperform the global stock market in the near term. (In fact, it’s already outperforming. Believe it or not, for the year-to-date, the U.S. stock market, despite its negative results, is beating nearly all of its counterparts in the developed world -- the United Kingdom, France, Germany, Japan, Australia. And it’s doing better than previously red-hot stock markets of emerging nations such as China, Singapore, Hong Kong, and India.)

What accounts for the U.S. market’s performance edge? And more pertinently, why do we think this outperformance will continue -- and produce a positive total return over the next several quarters? Let us count the ways:

One, the U.S. economy is close to its nadir for this cycle, in our opinion. The U.S. economy has been in a much-documented funk for the past year and a half, weighed down by the housing collapse, multiple credit crises, soaring commodity prices, and souring consumer sentiment. But we think the worst of the funk may soon be over. We can’t say the same, though, for other economies around the world; most of them are just beginning to weaken.

In Europe, for instance, housing, consumer, and industrial markets are starting to decline. Previously, there was much ado among business pundits about how economies around the world were supposedly "decoupling" -- that is, they were seemingly unaffected by economic sluggishness in the U.S. But the reality is that most economies, even those of the fastest-growing emerging nations, have proven to be all too "coupled:" they are now simultaneously succumbing to the aftereffects of slower U.S. growth.

Two, although higher commodity and energy prices have significantly boosted the Consumer Price Index and the Producer Price Index domestically, to a rate of about 4% year over year, their inflationary impact has been even more acute overseas. For example, the inflation rate is higher in China (6.5%), Russia (13.9%), India (7.1%), Brazil (6.1%), Venezuela (30.6%), and South Africa (9.6%), among others, according to The Economist.

As a result many nations face the heads-they-lose, tails-they-lose prospect of having to raise interest rates in an effort to curb inflation at a time when their economies are slowing, which in a vicious circle carries the risk of stifling their economies even more. And in the process, rising rates would reduce the return potential of their stock markets, in our judgment.

Three, the valuations of U.S. stocks are competitive with those in the rest of the world. Based on forward 12-month earnings per share, the price/earnings ratio of the S&P 500 Index is 13.2. Although this P/E ratio modestly exceeds that of foreign-stock benchmarks such as MSCI EAFE Index and the MSCI Emerging Markets Index, it’s low relative to historical norms. Also, the price/book-value, price/dividend-yield, and price/free-cash-flow ratios of U.S. stocks compare favorably with the ratios of foreign stocks, according to our analysis.

Four, with the notable exception of still-beleaguered financial-services firms, most U.S. companies are in great fiscal shape, with unprecedentedly strong balance sheets and record levels of free cash flow. They are generally raising dividends and buying back shares. And they are divesting their less-profitable businesses and reinvesting in their more-profitable ones.

Five, global investors have consistently lowered their exposure to U.S. stocks over the past eight years. This is part of a perhaps inevitable evolution, as more and more wealth is created outside American borders and as more and more investors want a global component to their stock portfolios. But if investors reallocate just a portion of that global money to U.S. stocks in pursuit of higher expected returns, it could help reverse the negative price momentum that has been the norm thus far in 2008.

Six, we think U.S. stocks look fundamentally more attractive than alternative investments in private equity, venture capital, and national infrastructure, whose prospects have diminished recently due to tightening credit around the world.

Seven, the stock markets of emerging nations are for the most part demonstrating that they are highly correlated with the price of oil and other commodities. That’s not good, especially since we anticipate that oil prices, which have fallen from a high of $146 a barrel in July to about $126, may continue to drop. And if falling oil prices push down inflation in the U.S., we think it could lead to gains in U.S. stocks from higher price/earnings multiples.

Finally, the real kicker to U.S. stocks could be a stronger dollar. For the last eight years, most of the generally modest gains earned by foreign investors in U.S. stocks have likely been wiped out by the slumping dollar, assuming that those investors were unhedged to changes in the value of their home currencies. Conversely, a stronger dollar would boost foreign investors’ returns in the U.S. stocks.

The bottom line: we think that U.S. stocks’ valuations are about as good as any in the world, most U.S. companies are well-managed and cash rich, the U.S. economy is close to a bottom, foreign economies are starting to soften, and foreign investors have an opportunity to make money two ways on U.S stocks, from capital gains and a stronger dollar. Seldom have foreign investors -- and U.S. investors -- been able to buy some good U.S. companies with such historically low share valuations and reasonably good earnings prospects. Excluding financials, the S&P 500 Index companies are expected to report growth in earnings per share of 11.4% for 2008 and 13.5% in 2009, in the estimation of Merrill Lynch.

The stocks that in our view offer both attractive values and good prospective earnings power constitute a Who’s Who in Corporate America; they include Wal-Mart Stores, Google, McDonald’s, Coca-Cola, PepsiCo, Procter & Gamble, Goldman Sachs Group, Charles Schwab, Baxter International, Gilead Sciences, Monsanto, Mosaic, Applied Materials, Deere, Caterpillar, Microsoft, IBM, General Electric, Cisco Systems, and Qualcomm.

In sum, the U.S. Olympic team should acquit itself well in the competition in Beijing from August 8 to 24, all to the accompaniment of the raucous chant U-S-A! U-S-A! U-S-A! But we think the investment cry of U-S-A! U-S-A! U-S-A! for U.S. stocks will likely be just as vocal and positive but persist longer, during the remainder of 2008 and early 2009.

The views expressed represent the opinions of Turner Investment Partners as of the date indicated and may change. They are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. Opinions about individual securities mentioned may change, and there can be no guarantee that Turner will select and hold any particular security for its client portfolios. Earnings growth may not result in an increase in share price. Past performance is no guarantee of future results.

Turner Investment Partners, founded in 1990 and based in Berwyn, Pennsylvania, is an investment firm that manages more than $26 billion in stocks in separately managed accounts and mutual funds for institutions and individuals, as of June 30, 2008.

As of June 30, 2008, Turner held in client accounts 660 shares of Wal-Mart Stores, 823,790 shares of Google, 410 shares of McDonald’s, 6.2 million shares of Coca-Cola, 540 shares of Procter & Gamble, 1.4 million shares of Goldman Sachs Group, 7.3 million shares of Charles Schwab, 5.0 million shares of Baxter International, 8.6 million shares of Gilead Sciences, 2.5 million shares of Monsanto, 1.2 million shares of Mosaic, 16.9 million shares of Applied Materials, 3.6 million shares of Deere, 27,350 shares of Caterpillar, 2,790 shares of Microsoft, 670 shares of IBM, 1,080 shares of General Electric, 22.1 million shares of Cisco Systems, and 9.6 million shares of Qualcomm. Turner held no shares of PepsiCo.