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| Stephen Smith, Founder & Chief Executive Officer, Smith Group Asset Management, a solution provider at the marcus evans Foundations & Endowments Investment Summit Spring 2012, on looking towards thriving asset classes in the US market. |
NEW YORK, N.Y., May 16, 2012 - (ACN Newswire) - Chief Investment Officers (CIOs) must ensure that all investment portfolios have a focal point on companies that are in flourishing sectors, says Stephen Smith, Founder & Chief Executive Officer, Smith Group Asset Management. "Based on a recent study we did, the US stock market should expect double-digit annualized returns over the next ten years. Investors need to look beyond the recent negative news events, and realize that the US stock market is still undervalued even though it has nearly doubled over the last three years," he adds.
From an independent investment advisory firm at the upcoming marcus evans Foundations & Endowments Investment Summit Spring 2012 in Wheeling, Illinois, July 23-25, Smith discusses stock market returns and investing within the US.
- How should risk be managed in stock market portfolios?
There are two types of risk. First is the risk of losing money and of having a high variability of unpredicted returns. The second is the risk of underperforming. Most managers try to optimize or compromise between the two risks and end up not satisfying either requirement. In my view, they should focus appropriately on the one specific risk that their client is most sensitive to.
- How can stock market returns be predicted?
Investors are still feeling the pressure of the European crisis, the dysfunctional political process and the previous recession. These negatives are overriding the way people feel about the stock markets.
In such pessimistic periods, people do not usually commit money to an asset class that is under stress. According to history, however, this is the best time to invest in the stock market. Based on studies we have done, stock market returns can be predicted with some accuracy based on the price-to-earnings ratio at the beginning of a measurement period.
The price-to-earnings ratio at the beginning of this year was 13. History suggests that at this level of valuation, there is a high probability that ten years from now, we will have had a double-digit annualized return from the S&P 500 index. Most experts and individual investors would not forecast such a high rate for the stock market today. If investors can go beyond the negative feelings they have right now, this may be a landmark time to commit new investment fund to the US stock market.
- How can investors prosper in the current economic environment?
Investors should not get caught up in the fad of the moment, whether it be hedge funds, private equity, or other illiquid investments. They should also make sure that they have thought through what is likely to happen to their bond investments when interest rates rise, which will happen as the economy improves.
There are several sectors in the US economy that are being favored or disfavored by the current economic environment. CIOs must ensure that they match portfolios with companies that are in flourishing sectors. Right now, the sectors that seem to be doing best within the economy are healthcare, consumer discretionary and technology.
The poorest areas are the financial sector, especially multi-national commercial banks due to risks associated with the European financial crisis, as well as regulated utilities and telecom.
- Should investors also look outside of the US?
Investors should not give up on the US. It is trendy to look at investing in emerging markets, and there is logic behind that because there is growth in developing economies, however the US is still the largest economy of the world, and the one that other countries are trying to emulate. The US is currently undervalued by most measures and is likely to be a key performer over our ten-year forecasting horizon.
About the Foundations and Endowments Investment Summit Spring 2012
This unique forum will take place at the Westin Chicago North Shore, Wheeling, Illinois, July 23-25, 2012. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on the rebounding investment market, developing innovative asset allocation strategies and forging groundbreaking tactics for the future. For more information please send an email to info@marcusevanscy.com or visit the event website at www.foundations-endowmentssummit.com/StephenSmithInterview
marcus evans group - investment sector portal: http://tiny.cc/4QCf2b
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About Smith Group Asset Management
Smith Group Asset Management is an independent investment advisory firm. Founded in 1995, we manage equity portfolios for institutions, as well as families and individuals. Our seasoned investment professionals use a disciplined investment process focused on building portfolios that generate superior, repeatable returns. With a solid performance record and an exceptional investment team, we are well positioned to create value. www.smithasset.com.
Contact:
Stacey Melvin,
Journalist, marcus evans, Summits Division
Tel: + 357 22 849 400
Email: press@marcusevanscy.com
Topic: Research / Industry Report
Source: marcus evans Summits
Sectors: Daily Finance
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