LAZAR & TRAHAN: MACRO MATTERS

September 13, 2013

Even the most hard-core stock pickers on Wall Street watch out for big picture events that can move markets.  But which macro events matter most? Fed “tapering”? The slowdown in China? The housing recovery? Two investment research stars will be exclusively on WEALTHTRACK this week:  Nancy Lazar and François Trahan both left their previous firms to become founding partners in Cornerstone Macro, devoted solely to macro economics, policy and strategy.  What they identify as the next emerging market will surprise you!

WEALTHTRACK Episode #1012; Originally Broadcast on September 13, 2013

Listen to the audio only version here:
Nancy Lazar & François Trahan

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Guest Info


NANCY LAZAR
Co-founder and Economist
Cornerstone Macro

FRANÇOIS TRAHAN
Co-founder and Head of Portfolio Strategy
Cornerstone Macro


Newsletter


Consuelo MackIf there is one lesson investors have learned from the financial crisis and its aftermath, it is that macro matters! The risk on/ risk off market of the financial crisis, where the vast majority of assets moved in lockstep in reaction to a monetary policy decision, an economic number or political pronouncement is seared in the collective memory of investors. Macro forces have historically had an oversized influence on stock returns. For instance, over the last two decades, stock-specific influences have accounted for about 28% of stock market returns on average, whereas macro forces have accounted for nearly 70%. Since the financial crisis, their influence has risen to nearly 90%!

But which macro events matter most? How much attention should you be paying to the Federal Reserve’s possible “tapering” of its massive government bond buying program? How about the slowdown in corporate profit growth and the fastest rise in price-earnings multiples since the dot-com bubble?  How much influence will the surge in domestic energy and manufacturing production have on the markets? What about the slow-down in China? These are all trends being tracked by this week’s WEALTHTRACK guests, two investment research stars who recently joined forces to create a new institutional research firm, Cornerstone Macro, devoted solely to big-picture developments in global economics, policy and strategy.

Founding partner, Nancy Lazar, heads Cornerstone Macro’s economic research team. Lazar has been a coveted  Institutional Investor ranked economist for the past 12 years, including being ranked number #2 for the past four years. She is second only to Ed Hyman, her former business partner with whom she co-founded independent research firm ISI Group in 1991. Founding partner, Francois Trahan, is leading the new firm’s investment strategy team. Trahan has been ranked the #1 portfolio strategist by Institutional Investor for 6 of the past 8 years and #2 the other 2 years.

Lazar and Trahan believe we are in the midst of a fundamental, multi-year change in the economy and markets that will require new investment approaches. They say one of the best places to invest is right here at home. They call Middle America their “favorite new emerging market!” How do you invest in it? You can go straight to our EXTRA page to see their list of 96, mostly industrial companies that generate 75% or more of their revenues in the U.S.

Also, if you are a PREMIUM subscriber, be sure to check out our new comment feature on the PREMIUM page. We look forward to hearing from you.

Have a great weekend and make the week ahead a profitable and a productive one.

Best regards,

Consuelo
Mathews Asia


Action Point


DON’T BE AFRAID TO INVEST IN YOURSELF
You are the best investment you can make!


One Investment


LAZAR: DOMESTIC OPPORTUNITIES

  • Invest in U.S.-based industrial companies
  • Check out Francois Trahan’s list of companies here

“U.S.-based industrial companies, not only from potentially stronger domestic revenue growth but also the potential for mergers amongst them and/or international investment which is just starting to happen, so I think internationally you’re going to see some of these larger industrial companies see this opportunity in the United States very similar to what happened in the emerging world over the past 15 years, but instead of buying companies in China or India, they increasingly buy companies, the small and mid-cap stocks that Francois mentioned in the United States”

- Nancy Lazar

TRAHAN: BELIEVE IN THE U.S. CONSUMER

Buy U.S. Retail stocks

Trahan recommends looking at a mix of retailing related ETFs to take advantage of U.S. consumer spending.  Some of his suggestions:

Vanguard Consumer Discretionary ETF (VCR)

VCR Chart

VCR data by YCharts

Market Vectors Retail ETF (RTH)

RTH Chart

RTH data by YCharts

SPDR S&P Homebuilders ETF (XHB)

XHB Chart

XHB data by YCharts

“If you look at how retail performs as a group, as a sector, it’s basically the same thing as U.S. inflation trends, and so if you believe this story, this structural story of inflation that remains low and contained, I think what you want to go for is a retail-based ETF, and there’s plenty to choose from in that group.”

- Francois Trahan

 


Transcript


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WEB EXTRA: How To Invest In The New “Emerging Market”: Middle America  

Nancy Lazar & François Trahan from the Archives

July 27, 2012
Leading investment strategist, François Trahan takes on the naysayers and explains why he expects stocks to reach new highs in the coming months.


 

September 23, 2011
Wall Street’s number one investment strategist and Financial Thought Leader, François Trahan will explain why the old economic models are failing and why safety is the best strategy for investors.


 

December 21, 2009
Consuelo talks to one of Wall Street’s top investment strategists, François Trahan about why he believes the dollar is key to understanding stock market performance this year. Learn how to take advantage of the dollar, in weakness and in strength, with Wolfe Trahan’s Chief Investment Strategist.

 

April 17, 2009
Dealing with the new market realities. Two giants of behavioral finance, Yale Professor and “Irrational Exuberance” author Robert Shiller and MIT professor and hedge fund manager Andrew Lo, discuss where the money will be made in the new financial landscape. Plus, top rated economist Nancy Lazar, of ISI Group fills us in on the outlook for global economies and markets.

 

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