Market Monitor - Stuart Schweitzer, Global Market Strategist, JP Morgan Bank
Friday, October 10, 2008SUSIE GHARIB: Our "Market Monitor" tonight says, the markets are not over the hump yet, but he is more hopeful. Joining us now, Stuart Schweitzer, global market strategist at JPMorgan Private Bank. Hi, Stu.
STUART SCHWEITZER, GLOBAL INVESTMENT STRATEGIST, JPMORGAN PRIVATE BANK: Hey, Susie. Wow, what a week, huh? GHARIB: Well, I'm glad to hear you're more hopeful. Unbelievable week, and you're hopeful at the end of all of it. Tell us why. SCHWEITZER: Well, you know, it's several things, Susie. First of all, I have to say, I met with just so many clients this week, and it isn't as though everybody was saying, what should I be selling or should I be selling? I'm starting to see more people being interested in taking advantage of the bargains that have been created. Now, those will only be bargains if we live to tell about it. But I'm getting several other hopeful indications. You already mentioned on the program the big drop in oil prices. That's huge for giving people more spending power. I think what's happening this weekend, the G-7 meeting, I expect them to come out -- this is a global problem, and I expect them to come out globally-aligned. That doesn't mean everybody will do the same thing, but they'll have the same set of principles, I believe, and it will be helpful. And I have to say we saw some improvement in the credit markets today, with credit spreads the difference between what lower grade and higher grade borrowers have to pay coming down, meaning that investors were taking a little bit more risk.
GHARIB: Now, Stuart, you mentioned the group of finance ministers meeting in Washington, and I just have just now word that Secretary Paulson has said that he and his counterparts in Washington have agreed to an aggressive plan to deal with the financial turmoil, and also that the U.S. government has decided to take ownership positions directly in American banks. Now with this announcement, I'm sure more details are going to be coming out, how do you analyze how this will play out in the markets next week?
SCHWEITZER: Well, Susie, I think it's constructive to have aggressive action. We have to recognize that there have been several steps taken over the last number of weeks, and so far, no single action has served to build the kind of confidence that we hope to see. But it isn't as though we're going to suddenly have one thing that's going to happen and the bell is going to ring just like that. I think it's a process of rebuilding confidence gradually, and it's not just rebuilding confidence in the markets, but it's rebuilding confidence that the economy can function. And for that to happen, you know, I think the recession train has left the station. But for the recession to be contained and not be overly severe, we need credit to be available. That's the critical, must-have ingredient in all of this.
GHARIB: In terms of actually buying and selling that's going on in the markets, we've seen a lot of really great names of American companies that are selling at bargain basement prices. Do you think that now is a good time to start putting new money into these companies? I know you can't mention specific stock names tonight, but as a strategy, should investors start nibbling into the market?
SCHWEITZER: Well, you know, I think it's a matter of psychology, Susie, and in two ways. One, market psychology, because we see how fragile sentiment has been, and it could explode to the upside or it could deteriorate to the downside. I personally am more hopeful, as we said, about the outlook from here, even though I don't know that the bottom is here. But I think it's close. But then there's the question, what if that's wrong? And that gets to investor psychology. And if someone is in a position to ride it out, if they put money in and they're able to ride it out, they're not going to need the money, and they're willing to ride it for the medium to longer term, I think these are very attractive levels, presuming that the credit markets function, which is, I think, what we have to believe, and what I personally do believe will be the case at the end of all of this.
GHARIB: What is the biggest mistake that investors can make right now, in just a few words?
SCHWEITZER: Oh, wow. It's getting overly emotional. I think avoiding emotion in here and understanding yourself and your vulnerability to emotion is critical, but if you -- again, I'll go back to the principle that markets usually bottom when the news is horrendous, and still not ready to improve.
GHARIB: All right.
SCHWEITZER: And that means that an investor who buys could be tested. But I think if you've got the staying power, this will turn out OK.
GHARIB: All right. That's reassuring. Thank you so much, Stuart, for coming on tonight. We really appreciate it.
SCHWEITZER: Always a pleasure, Susie. Bye-bye.
GHARIB: My guest tonight, Stuart Schweitzer, global market strategist at JPMorgan Private Bank.
