January 22, 2009
Though the current market climate continues to be gloomy, portfolio manager James Cullen of Schafer Cullen Management in New York sees a few reasons have potentially “very bullish long-term implications for the market.”
- Attractive Valuations- “First there are attractive valuations. The recent decline in the market has now brought the market down to interesting levels for the first time in many years. We are assuming that S&P 500 earnings will drop 20% from the present level to $75 a share. With the market selling at 850, the S&P would be at 11 times earnings, a level we haven’t seen since 1974 and 1982.”
- New President- “Then there’s a new President. President-elect Obama looks like he is going to hit the ground running with a new stimulus package. Equally important is the fact that most other countries around the world are also announcing stimulus packages, i.e., China, France, Germany, etc.”
- Timing– “Third is timing. The government agency responsible for officially declaring when the recession started surprised many by saying the recession started a year ago. Looking at the history of recessions and their interaction with bear markets, a recession that lasts more than a year and a half is very long. The good news is that the stock market tends to turn up way before the recession ends.”
- Cash– “Last is that there is more cash available now for investing by both US and global investors than ever before. To show how strong the flight to safety has
been, one need only look at a recent Treasury offering in which the yield offer on the bonds was zero. This is the exact flip side of the risk spectrum relative
to where we were with the NASDAQ at the top of the tech bubble.”
For our complete Investing Strategies Report, including a complete interview with Mr. Cullen, as well as interviews with portfolio managers in a variety of styles and focuses, click here.
