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BlackRock chief investment strategist Russ Koesterich breaks down his positive outlook for the markets.
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Our -- will exactly -- nomination for Treasury Secretary impact these markets joining us now with more on that.
Plus some of the biggest issues -- -- based in the market this year black drops cheap investment strategist.
Rest coaster and it's -- first congratulations on your big promotion of love the title of certain looks really good on the business guard.
I'm not a -- we.
We have and we got a lot -- on.
We got a debt ceiling we got Dodd-Frank come into the markets we got small businesses that -- is down in the dumps and don't wanna hire.
And -- you have a positive outlook for this market top panel.
We -- I think -- positive let's qualify we're talking about much of this is gonna be a stronger of the years 2012.
We see opportunities and I think -- on a relative basis stocks still look better than bonds we do expect the market -- higher this year particularly outside the US.
I repeat that short answers your question is that while the market at a nice rally 2012.
By and large valuations are reasonable particularly internationally.
And that gives you a little cushion.
And some of the challenges some of the potential bad news is already reflected in the price of the stocks.
That's interesting to ask a lot of analysts we've had on him recently say they believe the fundamentally stocks -- pretty well price right now but.
Here especially lukewarm at best it looks like on US equities.
I would consider a lukewarm but I would say that -- better opportunities elsewhere and you know I think the point you made -- is a key one.
Which is relative valuations -- take the US right now looks reasonable relative to its history looks very cheap compared to bonds.
If I compare US equities vs the rest of the world ex US.
US stocks are trading about a 40% premium.
Based on price to book now for a lot of the last few years that premium was justified the US is growing faster.
-- with a safe port in the storm.
But he she discussed a moment ago with the debt ceiling -- mean with the other issues it's not clear that premium as justified today and may be better opportunities overseas.
OK so what does that mean then we're talking about like this emerging middle class in the emerging countries -- does that mean consumer Staples.
What better used in those countries are really good place for people right now.
You'll actually I think that's been.
He could play the last few years but what I would advocate -- -- -- He's only those emerging markets directly so what I think people down really since 2010.
You've owned the Staples you've owned the companies in the US who sold to those consumers.
The problem is now that many it has companies particularly in the Staples sector have gotten quite expensive but on the other hand the emerging market stocks themselves rather cheap.
Traded about a twenty to 25% discount to develop markets and that to me is right C one of the better opportunities.
For 2013.
Russell what about fixed income you believe the bull market in treasuries is over us -- that money go.
You know what we do think that treasury yields a bottom outside of -- you know sort of shock and economic shock.
That said we do think that the backup in yields is gonna be very slow.
Up even with a slow backup in yields what it means is that people that happen exposure to duration.
-- -- long exposure to a long dated maturities all -- face a lot of risk in terms it.
The capital.
So instead we'd like -- credit we like high yield.
Not because the -- -- appreciate much in 2013.
-- on a relative basis the income was much more attractive.
We like municipals began an asset class with some risks but better discount that into the price and we -- the treasury.
Market although hard to find these days.
So rest what outlook keeps up at night with all this stuff gone on what worries you the most about many fast and yeah.
I do -- liquid star yes.
All right I I.
I do think you know -- the US is a source of risk.
Not major risk the way we're talking 2008 it's not a systemic risk.
But I do worry about the impact of all of the fiscal drag the tax hikes this potential spending -- In the sense that this may be a much slower start to the year.
That investors anticipate it if you compound that with a -- of the debt ceiling and downgrade.
We may see again that the US is not the safe haven.
Many people up if it seemed -- today yeah hopefully we work ourselves out of this -- that was great interview -- --
