One on One with Stuart Schweitzer, Global Market Strategist at JPMorgan Private Bank
Friday, October 24, 2008
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SUSIE GHARIB: A short while ago, I talked to Stuart Schweitzer, global market strategist at JPMorgan Private Bank and asked him when will the markets stabilize?
STUART SCHWEITZER, GLOBAL MARKETS STRATEGIST, J.P. MORGAN PRIVATE BANK: Susie, I think the markets are in a very tough bottoming process. People lack confidence. There is blood on the streets. The likelihood of a sustainable upturn is sometime off and so the markets are in a very, very challenging bottoming process, probably with multiple bottoms until we finally form a base and can move higher.
GHARIB: But, still, what does it take to get to a bottom? Wall Street historians say usually bear markets from peak to trough, it's a 30 percent decline. Now major market averages are down 40 percent. So how much more selling?
SCHWEITZER: Susie, I think we are at a level that -- based on past history, it would suggest that the market ought to begin to recover here. The problem, however, is that the credit markets are still not healthy. They're still not functioning the way they need to. And without viable credit markets, it's very difficult for people to be confident in the outlook for the economy. So although I think prices are reasonable here, we are going to be testing that assumption as we go forward.
GHARIB: And what other assumptions are being tested? Clearly we got a lot of bad news this week, a grim forecast from corporate America, announcements of job cuts, slowing economies from China to Europe. Are the markets responding to that? Is it emotional selling or something else?
SCHWEITZER: Well, I think you make a very good point, that in addition to the problems in the credit markets, there are significant problems in the global economy, not just here in America, but globally. And one of the big problems for me over the past one year is that people have been far too optimistic about the outlook for the economy and now they're coming face-to-face with the reality of a much harsher economic outlook and everybody I know is downgrading their forecast of GDP around the world.
GHARIB: So what do you think is going to happen next week in the markets? We have a Fed meeting. We have GDP numbers coming out, a lot of economic reports.
SCHWEITZER: Well, I think that there is a basis for hope each step along the way on the part of government to take action, I think, offers hope to investors. It has only been two weeks since the latest programs began to be put into place, and I think we will see these programs increasingly take - become real. For example, on Monday the Fed's commercial paper funding facility will start up. In the middle of the week, we have the Fed policy setting meeting. And I think we will see people gain a little bit of confidence as these actions take effect and begin to be reflected in peoples' expectations for the future. But there is one other thing that we're all waiting for as well and that is the election. I personally think that the election - because let's face it, no matter what the polls look like, no one really knows what the outcome of the election is going to be and what actions the president-elect is going to take in terms of appointing a new team. And I think we need to get that clarity as well. That is coming very soon.
GHARIB: So what should investors do at this point, buy, sell, or hold?
SCHWEITZER: I think whether to buy, sell or hold depends on where they are. If someone has too much risk to be able to withstand this, what's that saying if you can't stand the heat, get out of the kitchen or something like that. If they've got too much risk in their portfolios, then selling may make sense. But personally, I think that prices are at levels that make selling, not for me, at least, that attractive a proposition. No one really knows where the bottom will be, but I think the values are reasonable here and I don't believe in Armageddon.
GHARIB: All right, Stu, we'll leave it there. Thank you so much for your thoughts. We always appreciate when you come on the program.
SCHWEITZER: It's always a pleasure.
