Growing Bullish on Wall Street -- Sort Of

Posted by: Joe Weber on June 10

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Burned badly by the Wall Street collapse and nervous about whether the three-month rebound is for real, many investment pros are still having a hard time flashing an unambiguous green light about the markets to their toniest and most conservative clients. But some are clearly moving off the red: Aaron S. Gurwitz, head of global investment strategy at Barclays Wealth, for instance, is now saying, “We are less pessimistic than we were, and that’s a very good thing. We hope and expect to be optimistic soon. That will be even better.”

To many folks, this kissing-your-sister response may seem more than a bit too cool. The Dow Jones Industrial Average has risen by more than one-third since its March 9 low point, so investors who could only see the bottom have missed out on hefty gains already. Of course, at about 8,800 we’ve got a long way to go to get back to the peak above 14,000 in the fall of 2007. But the trend line certainly seems to be pointing upward, making for a time when timidity can be costly.

Indeed, in their June edition of the client publication Compass some Barclays Wealth analysts are positively upbeat. “Both the macroeconomic and investment environments are now much brighter than they were, even a month ago,” writes chief investment officer Kevin Lecocq. “There has been a conspicuous recovery in many asset classes. Less obviously, but equally importantly, there are growing indications that output and consumption are not falling quite as sharply, setting the stage for economic recovery.”

Even with something of a mixed message, the folks at the Barclays wealth management division are advising clients to step up. They urge investors to buy a basket of emerging market currencies, saying they are undervalued compared with those of the developed world. Bank debt is also worth a look, they say, suggesting the further losses will be smaller than the market is now betting on. Finally, they believe Asian infrastructure stocks will deliver solid returns since emerging Asia “will be at the forefront of any recovery.”

The back-of-the-mind worry for the Barclays advisors is that current bullishness, about both the markets and economy, could prove misplaced. This would leave us with little more than a bear-market rally. Thus their caution and sense that it’s better to tread carefully in stocks, especially domestic U.S. ones, until corporate earnings and economic developments make it clear that an enduring recovery is under way.

But, however much they hedge, they can’t resist tilting positively. “If we truly have dodged the depression bullet,then we should expect near-term recovery in asset prices,” Gurwitz says. "That’s what we think is most likely to happen.”

Furthermore, while there is uncertainty about the future – isn’t there always? – they do say the worst is behind us. “Following the precipitous decline seen around the turn of the year, global activity is no longer dropping like a stone. Indeed, in a few countries – notably in non-Japan Asia – output has started to rise again,” writes senior economist Peter Newland. “The big question now is whether the pick-up is temporary or the real thing. We suspect the latter.”

Reader Comments

ifeelgood

June 12, 2009 09:54 PM

what is the point of this blog

Joseph Weber

June 12, 2009 11:30 PM

Several points, IFG. Chiefly, we want to provide some rays of light in the gloom. There really are signs of economic health emerging these days that most of the press don't focus on (or that simply get lost in the overload of information out there).
And in a larger sense, we want to chart that elusive notion, progress. Man's lot can indeed improve, both in the long and short run. Are we not better off materially than we were 50 years ago, even 25 years ago? No question. How did we get that way, when so much has gone wrong? Well, we did. In this blog, we aim to look today at the ways, small and large, that we are making gains. Clear enough?

Thank you for your interest. This blog is no longer active.

 

About

BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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