One factor that is a certainty at the moment is there is not a lack of strategy commentary around the future direction of the equity markets. The difficulty for investors is deriving an investment thesis from them since many different conclusions are drawn from the market's recent weakness.
In a recent interview of François Trahan of Cornerstone Macro by Consuelo Mack on WealthTrack, Trahan believes the next four years could be some of the best for U.S. equities. Trahan is a Founding Partner of Cornerstone and was ranked the #1 portfolio strategist by Institutional Investor in 2013. He has received this honor in seven out of the past 9 years.
One key underpinning of Trahan's point of view is the fact macro economic data is responsible for 80% of market moves. In that regard, he believes the U.S. economy and market is decoupling from many of the economies outside of the U.S. If one believes this viewpoint, he notes U.S. economic growth consists of 70% driven by the consumer and only 14% by exports, consumer oriented stocks should do well. As a result U.S. centric investments are an area of the market he expects to do well over the next four years. He does expect further choppiness in the market during the next three months.
One mantra that is getting repeated today is "don't fight the Fed." As the end of QE is near and the Fed poised to increase interest rates, probably mid year in 2015, higher rates are thought to be a negative for equities. He notes, however, that stocks can do well in a rising rate environment. In the 1990's the Fed had four tightening cycles and stocks rose in three of them and were flat in the other. We have commented on this fact as well, Rising Interest Rates Can Be Good For Stocks.
The entire interview below is worthwhile to review.