Top Wall Street money managers expect interest rates to stay particularly low in 2015 and the U.S. to lead the world in economic growth. However, they doubt that will mean stellar gains for stocks.
The panelists at the
Barron's Roundtable, including such brand-name stalwarts as Mario Gabelli, Marc Faber and Felix Zulauf, touched on items such as their personal forecasts for the S&P 500, how the oil shock will affect the world, and interest rates.
The high-water mark in their outlooks for U.S. stocks in 2015 was hit by Delphi Management founder Scott Black, who predicted the S&P 500 will go up 10 percent this year, including a 2 percent dividend yield — good, but still less than the outstanding gains of recent years.
At the other end of the scale, Faber, publisher of The Gloom, Doom and Boom Report, in typical bearish fashion, said he thinks stocks have already maxed out at their 2015 high.
The rest of the Roundtable appeared to be somewhere in between. Among them, Abby Joseph Cohen, senior investment strategist at Goldman Sachs, said the S&P 500 could end 2015 somewhere around 2,100 and post an annual gain of 3 to 4 percent, including dividends.
Gabelli, CEO of Gamco Investors, predicted a 2 to 3 percent gain, and Brian Rogers, chairman of T. Rowe Price, is looking for a total return of 5 to 8 percent.
"There will be a lot of volatility. It will be a trader's dream, but an investor's hell," predicted Zulauf, president of Zulauf Asset Management.
"There is the potential for many black swans when the world economy is growing insufficiently. The risk of conflict goes up. The war cycle is rising. There could be potential conflicts in Eastern Europe, and in the South China Sea. That could scare away investors."
On balance, the Barron's experts appeared to view the collapse of oil prices as a boon for the U.S. economy because it could add to consumer pocketbooks.
"I talk to the guys who are pumping gas, and they say the consumer is buying more beer." Gabelli said.
However, Faber took a darker view on the subject. "With low oil prices, you would expect discretionary spending to be picking up. Not so. Of the S&P consumer-discretionary companies that offered earnings guidance for the fourth quarter, 89 percent issued negative guidance. This is the worst reading in the data series going back to 2006."
Bond guru Bill Gross, portfolio manager at Janus Capital Group, is looking for a benign environment for benchmark government bonds, and most of the others were in the same neighborhood.
"If the new neutral rate is 2 percent nominally and zero after inflation, as I am suggesting will be the case for the next five years, it pays to borrow as opposed to lending. You can borrow at 2 percent in the future (and now even lower at 0.25 percent) and lever that into a 4 percent to 5 percent return," Gross said.
Gross predicted that high levels of debt will hamper the global economy in general and stocks in particular – including those in the U.S. – for years to come.
"We brought consumption forward and issued one giant credit card for the past 30 years. Now the bill is coming due. Investors need to get used to low returns, and low growth, inflation, and interest rates for a long time," he said.
The
International Monetary Fund (IMF) in a new report cut its global economic growth forecast for 2015, to 3.5 percent from its previous estimate of 3.8 percent.
"Global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply. But this boost is projected to be more than offset by negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies," the report stated.
The IMF said the U.S. should be an exception to a general global pattern of more downbeat forecasts. It forecast U.S. GDP growth of 3.6 percent in 2015 and 3.3 percent in 2016.
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