Three prominent investment strategists offered good tidings of positive U.S. market performance for the balance of the year. David Kelly of JP Morgan Funds, Robert Doll of BlackRock and Michael Ryan of UBS Financial Services buoyed an audience of financial advisors on the second day of IMCA's annual meeting in Las Vegas with their upbeat consensus. The trio's biggest disagreement concerned the performance of emerging markets.
Kelly (left) started the session by quashing investor fears of a double-dip recession and inflation. He said a double-dip recession implies a collapse of the cyclical sectors that typically rise as we emerge from recession. But these sectors never really got off the ground and consequently have nowhere to fall. Already two years out of the recession, the U.S. economy has achieved a mere 2.8% rate of growth — far short of the big bang that is normal after a recession. U.S. auto sales, housing starts and business equipment sales would need to shoot up dramatically to get up to trend. Kelly sees pent-up demand for these goods and expects rapid growth in the second-half of the year.
Nor does he worry about rising prices in the U.S. "If high commodity prices do not cause wages to go up, they will not stick in terms of inflation," he said. Overseas is another matter. "Everybody's been putting money in commodities and emerging markets. Eventually their monetary authorities will have to tighten," he says. But Kelly, a native of Ireland, doesn't think emerging economies have the fortitude to correct their problems in time enough to avoid a bust. He said of Ireland in the recent past and emerging markets currently, "They've never had a boom so good. When you've never had that, it's awfully hard to take away the punch bowl."
