One on One with Jason Trennert, Chief Investment Strategist at Strategas Research Partners
Wednesday, January 09, 2008
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SUSIE GHARIB: Our market guest tonight is forecasting that the S&P 500 will rise 11 percent in 2008. Joining us now with his analysis, Jason Trennert, chief investment strategist at Strategas Research Partners. Hi Jason.
JASON TRENNERT, CHIEF INVESTMENT STRATEGIST, STRATEGAS RESEARCH PARTNERS: Hi, how are you, Susie?
GHARIB: I'm pretty good. All right. A lot of investors are worried about recession. They are worried about a lousy earning season and the first five days in the markets weren't very good, the worst since 1978, I am told. Why your optimism?
TRENNERT: I think it's because there are enough actors working for growth that my best guess is that we will be able to avoid recession in 2008. I think the Fed is going to ease very aggressively. I think you're going to get a fiscal stimulus package, which is announced in the state of the union. Government spending is going to be up about 7 percent this year. A weaker dollar should lift export growth. You put all those things together and there's a decent chance we should be able to avoid recession. I am a little bit more worried about 2009. It is a close call but I think you're going to get weak growth but you're not going to actually get to an outright recession.
GHARIB: Looking at the S&P performance since it hit its record in October of 2007, it is down 11 percent. This officially means that it's gone through a correction. How much more to go before things really turn around?
TRENNERT: I think we are pretty close to at least a short intermediate term bottom here. I think you're going to really, obviously the earnings season is going to be very important. More important than the earnings is going to be the guidance. I think that's going to give a lot of people some - really some indication of what's to come in the future. I think it is very interesting to note that earnings generally speaking will be pretty good for the fourth quarter except for the financials. The question is whether the weakness in the financials spills out in the rest of the economy. Again, our best guess is no. It's a close call. But I think when all is said and done, the markets should be higher by the end of the year than it is today.
GHARIB: Jason, a lot of focus on the speech that Fed Chairman Ben Bernanke is supposed to be giving tomorrow, what does he need to say to make investors confident again?
TRENNERT: I think he's got to say that the Fed is very aware of the dislocations in the credit markets, that it's not overly worried about inflation. My own particular view is that Fed, inflation will be the worst - it'll be the least of the Fed's worries six months from now if they focus on inflation as opposed to growth. Growth is very weak right now. It could get a lot weaker if the Fed doesn't act aggressively. I think Chairman Bernanke will reassure the markets, but that's what he's got to say.
GHARIB: You mentioned financials a moment ago. We saw some financial stocks were up today. Is it too early to buy financial stocks?
TRENNERT: I would say for the average investor, the answer is yes. I think for those deep pockets and long time horizons, if you're Warren Buffett or Wilbur Ross or Abu Dhabi, they're buying the financials, but again, they have a very long term time horizon. I think what I would like to see and God forbid, that I would actually wait to see a high profile bankruptcy before I would actually step in to buy the financials. I think that's probably, this is a classic cycle. That's what's got to happen to get the Fed to remove any ambiguity about its future actions.
GHARIB: Aside from that kind of event, if some long-term investors have some new money, what would be the one or two stocks or sectors that you think would be a really good place to put it right now.
TRENNERT: I like technology quite a bit. I like Cisco quite a bit. It has a very strong international presence. It's going to be - it's going to benefit a great deal by the weaker dollar. I'd also look at some of the health care stocks like let's say Merck or Pfizer, some of the drug stocks. Those are very cheap right now, a very good defensive place to be as the economy slows. So we have a little bit of what I would call barbell approach where you are kind of taking somewhat riskier bets on technology and pairing them with less riskier bets in some of the defensive sectors.
GHARIB: Interesting way of putting it. Thank you so much for coming on the program, Jason.
TRENNERT: Thank you.
GHARIB: My guest tonight Jason Trennert, chief investment strategist of Strategas Research Partners.
