Matt’s note: I’m not the type to go out and freeze on New Year’s Eve to watch the ball drop. But I wouldn’t mind the view I had from the 30th floor of the Thomson Reuters building, where I rubbed shoulders with advisors looking to bright 2011.
Thomson Reuters used its Investment Outlook 2011 for advisors as a chance to demo Prism, a technology platform that it’s rolling out in the springtime. More on that below.
Advisors who gathered last night to hear an investment outlook by some of the best-known prognosticators around might as well have been at a pep rally for U.S. equities.
The extension of the Bush tax cuts will help the market, said Bill Miller of Legg Mason Capital, opining that they amount to another $800 million of economic stimulus. But the big bull market driver will be problems elsewhere – debt in Europe, growing pains in China – that chase money into the United States. He expects U.S. stocks will rise 15% in the next 12 months.
More than 100 advisors, brokers and wealth managers filled a conference room on the 30th floor in the Thomson Reuters Times Square building to hear Miller, Liz Ann Sonders, the chief investment strategist at Charles Schwab and Co., and Jean Chatzky, personal finance editor of the Today Show.
Thomson Reuters used the conference to demo its new wealth management system, Prism, which is coming out in spring 2011. The Reuters representatives emphasized its portfolio management capabilities, account aggregation features and its high-quality client interface.
“Prism combines account aggregation with financial analysis and educational information to provide investors with a truly holistic view of their wealth,” said a placard that was left on all the conference seats.
Tech is a tough sell in a crowded marketplace (see the tech category in RIABiz’s directory, “www.riabiz.com/d”: www.riabiz.com/d). The advisors who walked in the door were more focused on gleaning information they could use to navigate the stock market for their clients. Most of the advisors seemed bullish when they walked in the door – but were happy to have a confirmation of the ideas they’d worked out sitting alone at their desks.
“It’s a nice affirmation” to have the experts confirm what you think, said Kathy O’Connor, president of Manhattan-based KJ Capital Management LLC.
Translating that optimism to average investors is the tricky part. Sonders quipped about the “resilience of investor pessimism” when the market is up more than 70% from its 2009 low. Unfortunately, retail investors will only start to invest in the market when prices start to go up, Miller says.
Miller, who famously beat the S&P 500 Index for 15 straight years and then saw his stock picks crumble in the face of the recession, was probably the top draw.
Big four bank stocks
Michael Felman, president and CEO of MSF Capital Advisors, a Brooklyn-based financial advisory firm, says he’s going to take another look at big bank financials based on Miller’s contention that the big four – Bank of America, Citigroup, JPMorgan Chase and Wells Fargo – will make up 25% of 2011 earnings growth in the S&P 500.
Overall, Miller said, he thinks U.S. stocks will be up 15% in the next 12 months.
Advisors seemed to be giving Miller a pass on poor performance since the recession: his flagship Legg Mason Capital Management Value Trust is underperforming 98 percent of its peers year to date as of Tuesday, said a Reuters story about the event, citing Lipper Inc. data.
Miller told Reuters in an interview that U.S. stocks are undervalued by 20-30% and under appreciated by institutional and retail investors.
There were no sparks between the panelists, who were all optimistic (Sonders has been upbeat for a year or more – at the IMPACT conference, she said the U.S. economy just lacks a spark to convince companies to spend the cash on their balance sheets. SEe Mellody Hobson and Liz Ann Sonders kicked off IMPACT on a bullish note).
Miller saw the Fed’s decision to buy up $600 billion worth of bank reserves as necessary, because the Fed is mandated to keep inflation low and employment high. But since they can’t lower the rates any further, buying bonds will keep the market from moving interest rates up.
Sonders added that most investors are wrong in thinking the Fed is printing money. “Most people don’t understand,” she says. The central bank has not increased the money supply, but increased the size of its balance sheet.
Concerns about an overheating property market in China will probably move dollars into the U.S., Miller says. He’s bullish on the dollar and bearish on the euro and yen.
The European debt crisis should move money back into the U.S., he says. The problem so far has been handled “ad hoc,” sort of plugging holes of leaky pool rather splurging for a new liner. Until Europe has its own TARP- style bailout, he sees the problems of the PIGS and Ireland floundering on.
The housing market should see a rebound in certain markets, especially those less affected from the housing boom. The real driver of new purchases will come if new jobs are added, says Chatzky, the Today Show personal finance editor.