Economy: U.S. economic data is weak in proportion to the stock
surge. A fall correction is likely. Current U.S. economic data can't
support market gain in the face of headwinds such as higher taxes,
higher oil prices, and higher interest rates.
Calm before the storm: Expect a return to stock market volatility
this fall as negative campaign rhetoric keeps apathetic investors on
the sidelines. Heightened investor anxiety. Europe and Washington
return.
Volatility creates opportunities: Be opportunistic. Investors
should position themselves with cash to take advantage of market
correction. The U.S. stock market/earnings are resilient despite
challenging data and need to be viewed in the context of looming fiscal
challenges.
Housing: Bullish on housing/ real estate recovery. Confidence has
returned to the housing recovery. Sentiment is better. Favor building
material stocks over REITS/income plays as construction returns. The
housing recovery could overcome other headwinds and be a positive
surprise for growth!
Bond Complacency: Investors remain desperate for income, hiding
in the bond market, chasing more speculative areas of high yield and low
quality munis. If it has a pulse and income, they want it! I'm cautious
on High Yield Munis, High Yield Corporates, and MLPs.
Overseas Opportunities: The bad news is priced in overseas.
Valuations are lower, yields are higher. Income seeking investors will
find opportunities in less crowded overseas dividend strategies. Swap
into global multinationals from U.S. peers.
Likes: European Multinationals. Buy what's cheap, has compelling
values, and is selling globally. Higher yielding European alternatives
to U.S. companies: Ishares International Dividend Index (IDV) - yields
over 5%, Total SA (TOT) - European oil company, and Vodafone. A weak
Euro is good for exports like
Siemens.
Dislikes: Don’t chase retail stocks. The spike in oil and food
prices due to the drought will challenge U.S. consumers and be a
negative for RETAIL stocks. Expect an increase in consumer savings,
which is bad for consumption in the near term.
Don’t hide in safe haven U.S. stocks that could be surprisingly
vulnerable to European challenges. Defensive stocks like McDonalds
(MCD), Proctor and Gamble (PG) and Ford (F) have significant European
exposure.
Long Term Opportunities: U.S. large cap growth stocks: Russell
1000 Growth (IWF). The cult of equities will survive, despite massive
outflows we have been seeing and investor preference for bonds. Great
balance sheets. The greatest area of outflows last 3 years but about the
best performance. Less affected by tax increases.
Feel free to contact Media One Management for bullet points on additional topics or to arrange a pre-interview with Larry.