The fixed-income market — particularly the distressed corporate-bond area — offers the strongest opportunities in the year ahead, he said.
LARRY LETTERIO
President
Peregrine Advisers Inc.
Wexford, Pa.
Assets under management:
$300 million
Forecast:
The fund of funds manager is "moderately positive" about equities in 2009, expecting a strong year-end finish after a slow start. But the fixed-income market — particularly the distressed corporate-bond area — offers the strongest opportunities in the year ahead, he said.
"There are so many [companies] that were typically investment-grade now trading at distressed levels," Mr. Letterio said. He's looking for returns of around 1% or a little better on the battered bonds.
He sees two positive forces shaping the investment climate in the year ahead: the vast infrastructure spending stimulus promised by the incoming Obama administration, complemented by the Federal Reserve's continuing fiscal stimulus.
The negative force is "the very real risk of deflation," he said.
The credit default swap market also remains an ominous overhang. "The government doesn't have a balance sheet big enough to fix the CDS market if it goes upside down," he said.
The 2009 finish line:
The Dow: Up 9%
The Nasdaq: Up 6%
The S&P 500: Up 7%
Tip sheet:
Favorite stock: Fluor Corp. (FLR).
Favorite sector: Infrastructure.
Next big thing: Government policies favoring infrastructure projects.
Biggest concern: Deflation, and a tough year for materials and energy stocks.
Reading, watching, listening to:
Newspapers: The Wall Street Journal, Barron's, InvestmentNews.
TV: "Monday Night Football."
Primary news source: Bloomberg.
