It’s easy to find bearish forecasts these days so it’s kind of refreshing to find asset class specific bullish forecasts. Especially when they come from someone who is not only bearish, but a very well rounded macro economist. In his latest Insights Newsletter Gary Shilling of A Gary Shilling & Co offers his latest list of bullish asset classes:
“Treasury bonds (favorable) – The rally in Treasurys resumed in March as a safe haven in a sea of trouble and in response to slowing economic growth and looming global recession. The likelihood that inflation fears will turn soon to deflation worries also helped. The yield on 30-year Treasurys actually reached our 2.5% target, the 2008 post- Lehman low, in early June. A 2.0% yield is possible as economic and financial conditions deteriorate.
Income-producing securities (favorable) – As many investors favor income over problematic capital gains, included are stocks of utilities, drugs and telecoms with high, safe and rising dividends. But all stocks are vulnerable to a likely bear market. Also, investment-grade corporate and municipal bonds and some Master Limited Partnerships are attractive.
The dollar vs. the euro, Australian dollar and the yen. Also the Dollar Index (favorable) – The buck is the world’s safe haven. The eurozone financial crisis remains unresolved and the recession there deepens. Australia has become a captive mineral supplier to faltering China. The yen is volatile but down year to date.
Rental apartments (favorable) – Have gained favor by those who can’t afford home ownership and are discouraged by falling house prices. Their stock prices seem overblown, but direct ownership of rental apartments may still be attractive.
Medical Office Buildings (favorable) – The aging postwar babies, the 2010 health care law and the migration of physicians from private practice to hospital employment will promote robust, steady growth in this real estate sector. But government regulations can be disruptive.
North American energy (favorable) – Americans have decided to reduce dependence on imported energy from high-risk foreign areas. We like conventional energy investments including natural gas, on- and off-shore drilling and Canadian oil sands. Natural gas prices appear to have bottomed, and pipelines are attractive. New nuclear facilities may be postponed in the wake of the earthquake and tsunami in Japan. Renewable energy is problematic since it depends heavily on unpredictable government subsidies amidst federal cost-cutting. Ethanol suffers from drought sired corn price leaps.”
Source: A. Gary Shilling & Co
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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