Value manager predicts rising stocks and better returns in 2014. Why things are looking good — really good — for investors in the New Year.
The S&P 500 could hit 2,000 sometime within the next six months and tapering by the Federal Reserve might not begin until March.
Those are a few of the predictions by a team of portfolio managers at asset management firm Neuberger Berman, which held a media briefing Wednesday on the company's outlook for 2014. The general sentiment: Things are looking good — really good — for investors in the New Year. Here's a few conclusions from the event:
Stay bullish on U.S. investments. Eli Salzmann, a portfolio manager for U.S. large cap value strategies, said the firm has been bullish since June 2012, and he doesn't expect the stance to change anytime soon. He is expecting “mini-hyper growth” at the start of 2014. “I think the first half of next year will surprise everyone on the upside,” he said. “We're not in the beginning of the game. We're in the sixth or seventh inning, but we're going to go higher.”
On Tuesday, the S&P 500 slipped 0.2%, or 3.66 points to 1,787.87. That said, it is up more than 18% year to date.
Outside of the U.S., proceed with greater caution. Benjamin Segal, a portfolio manager for the mutual fund global equity team, said he is not as bullish on foreign investments due to the current macroeconomic environment. He predicts that growth of multinational companies will decelerate and there will be a shift in favor of local business abroad. “We're starting to get more optimistic on the fundamentals of emerging-markets companies,” Mr. Segal said.
Expect better returns despite the low-rate environment. The markets are beginning to normalize and bond returns next year could rise into the 1% to 3% range, said Andy Johnson, the firm's head of investment grade fixed income and a portfolio manager for multiple core bond portfolios. “Three percent is very optimistic,” he said. “My expectation would be for rates to be marginally higher a year from now.”
Tapering from the Federal Reserve is still a way off. Mr. Salzmann said he doesn't expect tapering to take place “anytime soon,” predicting the Fed will hold off until about “March-ish.” When it does occur, he doesn't expect it to spark a market downturn. In fact, it could prove healthy for the economy. “From an equity standpoint, a mild taper would be really, really good news,” he said.
Overall, the economy is going to get better. “No ifs, ands or buts about it,” Mr. Salzman said. With the amount of stimulus being pumped in by central banks worldwide, he said economic growth is bound to occur and companies are going to begin to spend again soon, likely by the first quarter of 2014. Investors should be optimistic. “Christmas will be better than everybody fears,” he said.
