Tags: Skeoch | rally | stocks | Japan

Standard Life Investments CEO: Stock Market Rally Has Room to Run

By    |   Friday, 12 April 2013 11:04 AM

The latest stock rally will continue, predicts Keith Skeoch, chief executive of U.K.-based fund manager Standard Life Investments.

Skeoch gave CNNMoney several reasons why he believes stocks will continue to soar.

For one thing, corporations have strong balance sheets, he said. “With so much cash on the balance sheets, the ability of corporations to pay dividends to investors is becoming easier.”

Video:
Economist Predicts 'Unthinkable' for 2013

Monetary easing policies of central banks around he world is great for stocks, and the central banks, Skeoch predicts, will continue easy money policies until an economic rebound is well-established.

In the latest example of central banks easing the money supply, the Bank of Japan’s raised its inflation target and began a massive bond-buying program.

Although stocks are at record highs, they’ve needed almost six years to regain values lost during the financial crisis and ensuing recession.

The fund manager has moved about $272 billion from bonds to stocks since the third quarter of 2011. “This is not ‘we buy equities because equities go up’,” Skeoch told CNNMoney. “We are looking at stocks through the lens of income and sustainable cash flows.”

The biggest danger for investors isn’t a correction, he noted. Rather it’s missing a big run up.

Rising interest rates pose a threat to bonds, he told CNNMoney. “Big balance sheets are starting to understand that they are too exposed to interest rates and duration. The real stress point right now is in fixed income.”

Skeoch likes U.S. stocks and believes Japanese stocks will probably increase over the next several years. Although the U.K. economy is hardly robust, its FTSE index offers good exposure to global stocks, as most of the firms it lists are based outside the United Kingdom, he explained.

On the other hand, he is neutral on emerging markets and Brazil is too hot for his liking.

Simon Baker, CEO of Baker Avenue Asset Management, is also bullish on Japanese stocks, according to CNBC. “They’re starting to get very aggressive,” he said, suggesting investors look at the iShares MSCI Japan Index (EWJ) exchange-traded fund, which tracks Japan.

Other financial pros offer varying advice on how investors can best take advantage of rising stocks.

Stephanie Link, director of research at TheStreet, recommends a value approach and cites financial companies like Hartford and AIG that are trading below book value, according to CNBC.

“Or you can look at industrials,” she said, “especially those that have done transformational deals such as Eaton and United Technologies. I think both will be in a strong competitive position going forward.”

Joe Terranova, chief market strategist for Virtus Terranova, recommends natural gas, particularly BBG and Southwestern Energy. “I think prices rise to $4.50 maybe even $5,” he told CNBC.

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The latest stock rally will continue, predicts Keith Skeoch, chief executive of U.K.-based fund manager Standard Life Investments.
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