News Brief from AXA Equitable: Highlights from recent notable market news reports
Oct. 7, 2011
One of Wall Street’s most optimistic stock strategists has begun to lose confidence in the wake of the third-quarter market slump (“S&P 500 Falling Below 1,100 Puts Bear Market in View for Wien,” by Rita Nazareth, Nikolaj Gammeltoft and Inyoung Hwang, Oct. 4, 2011, Bloomberg).
“Obviously I’ve been too optimistic,” Byron Wien of Blackstone Advisory Partners told Bloomberg. At the beginning of the year, Wien predicted the S&P 500 would gain more than 19 percent in 2011. Now he says he’s not so sure, though a fourth-quarter rally could stave off a bear market.
“We can avoid a recession,” Wien said, but if the stock market slump continues, consumers may lose confidence “and that can produce a recession.”
Leading bond fund manager Pacific Investment Management Co. (Pimco) appears to have moved in a similar direction by reversing its call early in the year that a bond bubble was inflating (“Pimco’s Total Return Fund Has 16% in Treasuries,” by Daniel Kruger and Cordell Eddings, Oct. 3, 2011, Bloomberg).
As of Sept. 27, Pimco CEO Mohamed A. El-Erian told Bloomberg it had 16 percent of its assets in U.S. Treasurys, which gained the most in a quarter in almost three years. “We’ve rebalanced,” El-Erian said. “The U.S. benefits the most from a flight to quality.”
Individual investors have also demonstrated a lower appetite for the risk in equities (“Investors Sing a New Tune—’Won’t Get Fooled Again,’” by Simon Constable, Oct. 2, 2011, The Wall Street Journal). Constable wrote that if the economy does relapse into recession, it might develop into “a situation where avoiding stocks altogether could be better.”
“There are times — and now is a good example — when it’s better to have a frustrating experience and not lose money,” financial advisor Hugh Johnson told The Journal.
Marc Pado of Cantor Fitzgerald, however, told The Journal a positive surprise is possible, citing low inventories in the U.S. A pickup in demand would force a surge in production. “It could be greater than many think,” Pado said.
IMPORTANT – AXA Equitable, AXA Advisors, LLC (member SIPC) and their affiliates do not provide tax/legal advice, or investment or market research. The quotes provided in this News Brief have been excerpted from media reports for general informational purposes only and do not represent the opinions of AXA Equitable, AXA Advisors or their affiliates, associates or employees. AXA Equitable and its affiliates make no representation as to the accuracy or completeness of any statements, statistics, data, opinions, forecasts, or predictions provided herein, nor will this information necessarily be updated or supplemented at any time. Any reference to market or index performance is for informational purposes only. It is not possible to invest directly in an index. This material is not intended, and should not be relied upon, as investment or financial advice and does not constitute an offer or solicitation of any kind.
