Sunday, January 11, 2015

Ed Hyman: Bull Market In Early Stage

Ed Hyman, Chairman of Evercore ISI, has been ranked the #1 economist by Institutional Investor for an unprecedented 35 consecutive years. In a recent interview he participated in with Conseulo Mack of WealthTrack, Ed Hyman provides his outlook for the economy and markets in 2015. In one portion of the interview below, he believes the economy and equity markets are in their early stages of recovery. One fact he noted is many of the cyclical components of the economy are where they would be at the beginning of an economy coming out of recession. The fact the economic contraction resulting from the financial crisis was so deep, the recovery to date simply gets the economy back to its more typical early stage.

A caution he was certain to note centers around the consequences that historically have occurred with a contraction in oil prices. He points out that prior oil price contractions, like currently being experienced, have generally been associated with some type of financial shock in some segment of the market. In 1986 when Brent Crude fell from $30/bbl to $10/bbl, although GDP growth was 3% and the market returned 15%, we did have the S&L crisis. With the oil price decline in 1996 to 1998 the market had to navigate the fall out of Long Term Capital Management, the Asian financial crisis in 1997 and the Russian financial crisis in 1998. In spite of these crises, in 1997 the S&P 500 Index was up over 30% and in 1998 the Index was up 27%. Knowing where the next crisis will develop is most certainly a search for a needle in a haystack. Diversifying one's investment portfolio should insulate one from a potential shock like experienced in the late 1980s and  late 1990s. Below is PArt One of the WealthTrack interview.

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