Market Outlook Shared by Stuart Schweitzer of JP Morgan Private Bank

SUSIE GHARIB: On Wall Street, it was a day of indecisive trading in the
markets. Investors were holding back ahead of the Federal Reserve’s policy
meeting tomorrow, waiting to see what policymakers decide to do about
interest rates. By the close, here’s where the major averages finished the day: the
Dow added 37 points, the NASDAQ fell more than four, the S&P up just a
fraction. Joining us to talk more about the outlook for the markets: Stuart
Schweitzer. He’s vice chairman at JP Morgan Private Bank. Hi, Stu. And thanks for joining us.

STUART SCHWEITZER, VICE CHMN., JP MORGAN PRIVATE BANK: Absolutely.
Always a pleasure, Susie.

GHARIB: So as we just said, investors are waiting on the Fed, are
you expecting any new policy moves coming out of that meeting tomorrow?

SCHWEITZER: I don’t think so. The economy is doing OK. So I think
the Fed should and probably will stand pat and wait to see what unfolds.

GHARIB: You know, investors are also waiting to hear from the Fed
about those bank stress tests. That should be coming out at some point
this week. Do you expect any surprises there?

SCHWEITZER: Well, I think the market has been focused on this, as
you mentioned earlier. And, no, I don’t think there will be very many
surprises. The Fed is on the case, which means that investors can at least
have a little bit of less concern. If the Fed’s doing their worrying for
them about the way things might unfold, then investors perhaps can worry a
little bit less.

GHARIB: Are you investing in any of the big banks?

SCHWEITZER: Well, we invest on a more sector neutral basis. And we
certainly own for — on behalf of our clients significant amounts of large
cap U.S. equity. And we think that equities are reasonably attractive at
these levels. For clients that have a lot of cash on the sidelines, and so
many investors do, these are still reasonable entry points back into the
market.

GHARIB: So tell us a little bit about that, yes, investors are
sitting with a lot of cash. They are very nervous still. You heard our
report about oil and gasoline prices. They are very concerned about things
that are going on around the world. And so, they’re still sitting on cash.
What are you telling them to do with their money? Where should they
put it?

SCHWEITZER: Well, we’re advising clients to be diversified, and that
means owning some stocks but also some bonds. And in the case of the
bonds, the one risk that really does concern us most is that interest rates
could rise — the longer the economy keeps growing, the more likelihood
there is that interest rates ultimately will start to back up and as that
happens, bond prices will go lower. So, we advice clients to maintain shorter than normal durations or
maturities for the bonds they own. And we think the place to be invested
in the bond market is not so much government bonds as it is corporate
bonds, high-yield bonds, for example, which offer relatively attractive
returns, we think, compared with the risks entailed.

GHARIB: Stu, what’s your thinking on U.S. stocks versus
international stock. Given the lingering concerns about what’s going on in
Europe, new concerns about the Chinese economy slowing down, what is —
where do you stand on that debate?

SCHWEITZER: Well, first, Susie, we really turned very strongly
negative on European equities two years ago. And we remain concerned about
Europe. They are kicking the can down the road but they’re not
fundamentally solving their problems. They’re merely arresting for the
time being a very difficult situation. Now, as to U.S. versus the rest of the world, I’d say we like them both. We like the U.S., and that’s because we have an improving economy
here. And as for Asia and the Chinese slowdown — well, you know, China is
slowing down but so is Chinese inflation, which allows the Chinese
authorities to provide some monetary support for their economy and their
market. And so, we think that Asia will do OK here.

GHARIB: OK. Stu, let me just jump in here because we have less
than, you know, 30 seconds. You said you’re cautiously optimistic. You
have told us about the optimistic part. What are you cautious about?
What’s your biggest worry?

SCHWEITZER: Oh, Susie, I think the biggest worry is that this
nascent recovery could falter yet again. You mentioned gasoline prices
earlier. It’s not some of the upward creep of gas prices, but if prices
should spike upward, as could happen in the summer, that would be very
unsettling for the economy. And it might derail this job recovery which
has been running now quite a bit stronger over the last six months.

GHARIB: All right, Stu. Thank you so much as always. It’s a
pleasure talking with you.

SCHWEITZER: Always my pleasure, Susie. Thank you.

GHARIB: And we’ve been speaking with Stuart Schweitzer, he’s vice
chairman at JP Morgan Private Bank.


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