NEW YORK — Expect 2007 to be a good year for stocks overall, although the ride will be a bit on the bumpy side.
That was the general consensus among panelists speaking at the 10th Annual Market Forecast Lunch on Thursday, hosted by the New York Society of Security Analysts. The speakers included Ralph J. Acampora, managing director at Knight Equity Markets; Richard Bernstein, chief U.S. strategist and head of the investment strategy group at Merrill Lynch; Ian Bremmer, founder and president of the Eurasia Group; Stephen S. Roach, managing director and chief economist at Morgan Stanley; Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. Inc.; Jason DeSena Trennert, managing partner and chief investment strategist at Strategas Research Partners, and David A. Wyss, chief economist at Standard & Poor’s. The panel was moderated by Vincent Catalano, president and chief investment strategist at Blue Marble Research.
Sonders said, in a handout to attendees, that she expects to see a mixed picture for the market this year, noting decelerating economic growth for at least the first half but also a decent chance of avoiding a recession. She pointed out that economic “soft landings” tend to be accompanied by strong stock markets.
Trennert anticipates some bumps, although he believes this year will be a “just right” economy where growth slows enough to keep the Fed at bay in terms of rate changes. “The money is out there for a ‘melt up’ of stocks for the first eight to nine months. Whether the 10th month is also up would depend on the credit markets and interest rates,” he said.
Acampora, who said 10 years ago people avoided equities and that the equity allocation in balanced mutual funds back then was less than 50 percent, expects large cap stocks to outperform their small- and midcap counterparts this year.
However, Roach, a perennial pessimist, said the shift from an income-producing economy to one that is asset-based has the potential for long-term disaster. His major lament was that the savings rate is still down in the U.S. Commenting on same-store sales results posted Thursday, Roach said retail sales are entering a “period of somewhat slower growth.”
Wyss, who expects a soft economic landing, was even more pessimistic than Roach over the longer term. Four areas to consider, he said, are costs of energy and the need for alternative energy sources, an unsustainable trade deficit, the need to make education a priority among the younger generations and an aging of the U.S. population while savings remain low.
Bernstein told attendees to keep an eye on currencies. “When the currency falls, the standard of living falls,” he said. Over the longer term, or five-plus years out, Bernstein foresees the U.S. on the verge of a savings crisis. “The Baby Boomer has undersaved and will find that [he/she] can’t sell [his/her] home. This will constrain consumption.”