He predicted S&P 500’s record rally so what does market expert have to say about a global recovery?
Oppenheimer & Co Inc’s chief market strategist John Stoltzfus, who last year publicly predicted that the S&P 500 would reach record levels, was in Bermuda last week as the index reached an all-time high of 1,633.70.
He was on the Island to speak at a seminar entitled ‘2013 Economic and Market Analysis & Commentary’ at the Fairmont Hamilton Princess on Thursday evening for an audience of about 20 executives from the financial and international business worlds.
The seminar was organised by Jack Meskunas, the senior director of investments at Oppenheimer & Co Inc. He said: ”I feel that the basis of having the ability to make competent and correct investment decisions lies in having access to top-quality research and market insights. I feel John distinguishes himself in this area and that is why I wanted to bring him to Bermuda and introduce him to the Bermuda community.” Mr Meskunas described his own role as liaising between Oppenheimer & Co and the Bermuda institutional investor community.
Mr Stoltzfus is with the company’s Investment Strategy and Research Division, and he has also been a regular contributor and spokesman in the financial press and broadcast media. His presentation and comments during the seminar reiterated his more publicly broadcasted statements about his confidence in the market. In October 2012 the business news organisation Bloomberg quoted him saying: “We expect the process of fostering an economic recovery from the grips of a global financial crisis will persist and ultimately prove successful,” and he predicted then the S&P 500 would reach record levels. According to Bloomberg, the strategist had not expected the index to reach above 1,600 — but the day following his presentation in Bermuda it closed at its all-time high of 1,633.70.
Speaking after Thursday’s seminar to
The Royal Gazette, he said: “Basically, what we’re seeing in the economy is the market in recovery.” He had noted on March 9, 2009 — four years ago to the day of Mr Stoltzfus’ presentation, the S&P 500 reached a nearly 13-year closing low at 676.53.
He believes the S&P 500 will continue to advance, and has predicted a year-end target of 1,730, or over 100 points higher than it is now, and he also feels that the current period is marked by the degree of risk balanced against opportunity in the market.
Mr Stoltzfus explained: “There is a recovery for the market and economy which many people have questioned because of the involvement of central banks of the United States and around the world to keep interest rates historically low (in order to) encourage investment and restructuring both by companies and industries. At this juncture of the process, the economic recovery is an ongoing event.”
He said: “The economy has yet to recover, and there continues to exist a great many structural problems — among them government spending, government borrowing and government expenditure, and the effect of taxation. The challenges there that need to be addressed are still in the process of being addressed, and there may be some which have no solution.
“We believe there are solutions — but we are in the process of finding them.”
He pointed to the central banks and monetary policy officials as well as corporate and political leadership as among those responsible for finding them.
“In the meantime, this is a period of opportunity and risk — risk is a part of everything — it is a normal function of any life or business event,” he said as he emphasised his belief in equities for investment purposes. “We would think, from a financial market perspective, that opportunity presents itself in equities.”
He drew an analogy with the locally-based insurance industry, which at its heart balances risk with opportunity. “We think, being in Bermuda, just as insurance balances risk and opportunity, so it is that investing needs to balance risk and opportunity. For me, certainty visiting here in Bermuda and visiting with professionals in insurance industries, help by reminding me this landscape (in Bermuda) is like the one we are now in, involving risk and opportunity,” he said, advising: “The goal for investing is to avoid being overwhelmed by perceptions or projections of that risk.”
Mr Stoltzfus used the analogy of an S&P 500 ‘quilt’, highlighting financials, industrials, information technology and materials — sectors that relative to the 10-year average price/earnings ratio are still trading well below their 10-year average. He noted that while healthcare was at its 10-year average, he thought that government intervention and a growing baby boomer population will make the sector continue to grow.
He added that up until now value has been favoured in the rally over growth, but he sees growth taking over and becoming more favoured moving forward.