One on One With Stuart Schweitzer, Global Investment Strategist at JPMorgan Private Bank
Monday, August 25, 2008
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SUSIE GHARIB: Our guest tonight says volatility will continue to dominate the markets but he also says there are still some good money-making investment opportunities. Joining us now, Stuart Schweitzer, global investment strategist at JPMorgan Private Bank. Hey Stu, nice to see you.
STUART SCHWEITZER , GLOBAL INVEST. STRATEGIST, J.P. MORGAN PRIVATE BANK: Great to be back, Susie.
GHARIB: Let's talk about this volatility. You know we have seen in the last couple of days the market up, the Dow was up by 200, down by 200. What is driving this volatility? Is it the problems in the housing market? Is it oil prices or something else?
SCHWEITZER: How about all the above and the fact that so many people are on vacation. I think it may be you, Paul and I that are the only ones working these days. You know, trading is thin and anything can happen in a thin market. But all kidding aside, I mean the news isn't good. The economic news is probably not going to improve anytime soon. But I think investors pretty well know that. I think they have pretty well accepted that. Once that happens I think shares are in a better position.
GHARIB: All right. You're saying that this is a good time to buy or put some new money at any rate into the market. But some of the strategists who have come on our program are saying sell into the rallies. So give us your thinking. What's your analysis?
SCHWEITZER: Well, first of all Susie, as a backdrop my colleagues and I at JPMorgan's Private Bank had a lot of cash in our recommended portfolios over the last year. We raised cash early when other people were saying, things are still OK. And now that prices are so much lower and the economic news as bleak as it is, it's largely recognized as such, we feel that it's begun to be time to put a little bit of that dry powder to work. So we took about a third of the excess crash that we had in client portfolios and we advocated that clients buy large cap U.S. equities. I emphasize large cap U.S.
GHARIB: Why large cap U.S.?
SCHWEITZER: Number one I think the dollar has seen its bottom. And, and the dollar I think is headed higher from here, at least the declines are basically over. A lot of the returns to non U.S. investments have come from the decline in the dollar which make foreign shares worth more. But that's over, I think and so that's number one. Secondly, we're in America, we're the most adaptable place on the planet. Times are tough. Conditions are very, very challenging. But we are facing up to our problems and we're adapting as needed. And unfortunately that means cost cutting, which is no fun. Unfortunately, it means bank credit centers have to tighten, also no fun, but I think that puts us on the path to healing.
GHARIB: So what do you think has to happen to get the markets to be rallying on a steady basis, making a steady climb higher. This credit crisis now has been going on for over a year. What could it take to bring stability back to the market?
SCHWEITZER: First of all I want to make the point that I think the market will go up long before the economic news starts to look appreciably better. Markets typically bottom and start to go up, while the economic news is still getting worst. But one of the things that would clearly help would be to have lower commodity prices, in particular lower oil prices. The world is on the verge of, if not already in a recession, at least the developed world, the big countries of the world - the U.S., the U.K., continental Europe and Japan. All these are in or on the verge of recession and they're taking the rest of the world into a significant slowdown. That's got to bring commodities lower and that'll help to put some kind of a bottom under this market I think.
GHARIB: Real quick question. As you know, the Democrats are meeting in Denver for their convention, Republicans right around the corner. Wall Street lore says that markets rally in an election year. Will we see that this go around?
SCHWEITZER: I think politicians are going to want to do everything they can to support the economy and that could help the market. But I think what's of fundamental importance is that our central bankers, not only here but around the world, provide support for the financial system, provide support if financial institutions get into difficulty. I expect that's what we'll see and I think that's going to be a big plus going forward.
GHARIB: OK, all right, Stu, nice seeing you. Thanks so much for coming on the program.
SCHWEITZER: Always a pleasure.
GHARIB: My guest tonight, Stuart Schweitzer, global investment strategist at JPMorgan Private Bank.
