Consuelo Mack WealthTrack “New Financial World: U.S.” — premiering nationwide beginning TONIGHT Friday, January 6 at 7:30 p.m. ET on public television (check local listings**) and on wealthtrack.com — features part one of Anchor and Executive Producer Consuelo Mack’s annual exclusive interview with Wall Street’s No. 1-ranked economist for a record 36 years Ed Hyman, chairman and founder of Evercore ISI, who describes how much the financial world has changed in the last year. He and top mutual fund manager Matthew McLennan, head of Global Value Team and portfolio manager at First Eagle Investment Management, describe what it means for the U.S. economy and markets.
Mack offers this interview preview: “Hyman and McLennan think President-elect Donald Trump is a wild card. Hyman says Trump‘s policies of cutting taxes, spending on infrastructure and rolling back regulations could be good for economy and business. The market has already rallied strongly in anticipation of those moves. McLennan says the market is way ahead of itself and worries that Trump‘s spending and tax cuts will overheat the economy, substantially increase debt levels and prove to be inflationary.”
Ed Hyman is forecasting a modest pickup in GDP growth, inflation and interest rates: “Here in the states, I would say the main thing it looks like more growth, our wages are accelerating, and you still have strong employment. And I think that combination of employment and wages will get consumer spending up.” Global growth is improving, plus consumer confidence is at the highest level since 2001 and business confidence is up. Admittedly, he’s “a little insecure” about his forecast because the economy has picked up like this in other years only to peter out.
Ed Hyman says every U.S. city he travels to is “booming,” and recently added Des Moines, Iowa, Fort Wayne, Indiana, and Buffalo, New York to his list of approximately 40 cities that are doing well. Sectors driving cities are healthcare, higher education, new tech, e-commerce, sports and entertainment.
Ed Hyman believes the U.S. recession is years away. It won’t happen until inflation doubles and the Fed will be forced to react by raising interest rates. He cautions that surprises like Brexit and Trump’s victory can always happen, which could throw off his forecast.
Ed Hyman and his investment team are united on recommending one sector that will do well this year: financials. One way to invest is an ETF, specifically Financial Select Sector SPDR ETF (XLF).
Matthew McLennan as an investor is much more cautious. The U.S. economy has improved since the financial crisis, but he believes the market reflects it and that the U.S. stock market is overpriced.He thinks it’s hard to find many investment opportunities and looks for companies with stable businesses that will keep up with the economy and generate high free cash flow e.g. Oracle and Omnicom, which is his one investment recommendation.
McLennan is also concerned about high levels of government debt, which is higher than it was in 2007, before the financial crisis. If interest rates rise much more, servicing that debt will be very difficult.