Market outlook: After a difficult year, investments sill show opportunity
In 2011, the stock market went nowhere, so I guess we’ll take a mulligan,” says Doug May of May Investments, “However, the economic fundamentals look better now than they did at the beginning of 2011.” Overall, May talks to the fact that corporate earnings are higher while stock prices have not moved up much, thereby making the return on investment higher.
Additionally, May sees the economy moving forward better than it did last year and that Europe seems to be finding the needed funding for its countries that are having difficulty. As a result, he sees the stock market as having a strong likelihood of outperforming cash and bonds in the year ahead.
“Wells Fargo foresees the S & P 500 to be near 1350 at the end of 2012 and that the Ten Year Treasury will remain much the same at 3%,” says Todd Owen, regional investment manager at Wells Fargo, “But should global concerns subside both numbers could be higher.”
Both May and Owen agree that the European crisis will be key in the coming year to overall recovery in the United States. May believes the currency crises will morph into more of a traditional economic slowdown as banks cut back on credit availability and Owen foresees the economies of the affected countries exacerbating the overall situation. Additionally, Owen cites the US housing market to move very slowly as it works through excess inventory and distressed situations.
Overall opportunities are appearing, however, in sectors of investment portfolios. “High yield bonds will continue to be attractive in this low interest rate environment,” says Owen, “And US Large Cap Equities with a multinational presence and paying dividends have many opportunities for global growth. Finally, hedge funds can take advantage of the expected choppy markets as well as provide some protection on the downside.”
“If the Asian and Latin American economies begin to rebound, they have the potential to become a great place to invest in the year ahead,” says May, “And variations for equities are also attractive, so the stock market will likely be good to investors in the coming year.”