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Jeremy Zirin, UBS Wealth Management chief U.S. equity strategist, on how to invest amidst market uncertainty due to Moody’s bank downgrades.
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Bank downgrades the banks -- -- overall marketer in the -- so high you play this uncertainty.
We're joined by Jeremy easier and cheap EUS equity analyst for UBS wealth management -- -- to beyond that are right so.
Which way is up in this market nobody knows what to do you know we're so we celebrate bad news we get Brian economic data and we feel it at home but the markets up to the raises.
The banks -- downgraded but they're up today.
What do you do.
Now I think for a long term investors to stay invested.
I think that there is likely to be a lot of volatility in the near term given some of the macro -- not just here in the US but obviously these sovereign debt crisis in Europe continues to be.
No have periodic flare ups.
But the US economy seems to be on a reasonably good footing we're entering a little bit soft Patrick on this the last two years I think we'll come out of it and growth will moderately we accelerate -- second half.
And for equities that probably means that we who you know grind higher and -- we view equities as being about 5% -- so I think you stay the course.
T stay equities and -- I know you're recommending only two to 5% and casts -- -- put rescue money.
Nothing.
You know in terms of our tactical asset allocation we're neutral across most major effort boxes.
For a longer term investors I prefer equities over fixed income and given the very paltry yields both at the short end and -- into the curve.
But for you know even it for tactical investors over the next three to six months.
I think that equities offer reasonably good trade off between risk and reward.
S&P 500 right now -- trading at twelve and a half times earnings.
And I think most importantly that we've learned that even in -- sub par economic recovery.
And sluggish 2% GDP growth give -- take fifty basis points in either direction in any quarter.
The corporate earnings can continue to be fairly robust.
So I think that you know -- earning season should -- Some bullishness to the market that at some confidence to investors that even with just supposed you know softer economic data and softer tone.
Of the global economy over the past few weeks.
That corporate earnings are still fairly resilient.
UConn for around 14100 on the S&P 500 by the end of the year is that with or without.
More stimulus stimulus from the Fed.
That's certainly without and I think that actually would be a positive to signal for the market if the -- really articulated more of a clear exit strategy at some point.
We weren't expecting to see you know any quantitative easing in this week's FOMC meeting.
You know the extension of Operation Twist essentially just.
-- is keeping the Fed.
In in -- comedy -- mode I think that the Fed.
Decided to extend twist largely because they didn't didn't want to have a de facto tightening sense -- signal to the market.
Largely I don't think that the the Federal Reserve's keeping interest rates these levels and expanding their balance sheet really have the dramatic impact on the economy at this stage.
You know in the market has already pushed interest rates to one point 6% has already you know done the Fed's work work -- for some to some degree.
And did the price of credit is not the problem.
In in the overall economy right now.
It's nice to -- someone.
Against that more quantitative easing I let me ask you this one of the things senior notes -- -- me said that the impending fiscal -- is an incentive for businesses to start spending their money.
How come just dot.
Broke.
-- -- well I think I think the fiscal cliff is actually a risk to economic growth and you know the fact that with these businesses.
Are sitting on such huge cash words right now.
With the you know that uncertainty over what they -- customers tax rates are going to be.
Whether there's going to be sequestration whether there's going to be a payroll tax -- that's likely to actually limits some economic activity in the near term.
At the end of the -- businesses are reacting to final demand and at -- -- final demand is not great but it's not -- -- We've seen actually felt you know business loan demand up.
13% year on year which -- -- home prices are stabilizing so.
You know -- all the doing we'll talk about these that the economy is rolling over you know we certainly do have plenty of you know counter cyclical support for the market and that certain cyclical after the market are doing okay.
-- hopefully that all trickles down until little people like me Jeremy stared at UBS -- very much very thankful for me.
I with a downgrade may not be such a big problem for the banks but coming -- is and after break.
First let's take a look at some of today's winners and losers.
First -- still.
Had a good day.
