A rare interview with Cornerstone Macro’s Investment Strategist, François Trahan, who has once again been named the number one ranked strategist on Wall Street by Institutional Investor magazine, as he has been for eight of the last ten years. Trahan has been a stock market bull since the fall of 2011, when the recovery and the markets looked very dicey. Since then he has stuck to his guns and the market has proven him right. What’s his view now? Despite faltering growth in much of the world, rising geopolitical risks and the U.S. stock markets regularly flirting with record highs, he says the U.S. bull market still has several years to run. He’ll explain why.
CONSUELO MACK: This week on WealthTrack, a recent American citizen is also a patriot on the U.S. markets. Cornerstone Macro’s top ranked investment strategist explains why the U.S. bull market can go the distance. Next on Consuelo Mack WealthTrack.
Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. Last week on WEALTHTRACK we talked to a financial thought leader and leading economist Nancy Lazar about why she believes the United States is resuming its role as the primary driver of world economic growth. In case you missed it her thesis is that the U.S. has several big advantages – it’s recovered from the financial crisis ahead of just about everyone else in the world, it’s become very competitive globally because of cheap and abundant domestic energy and other business friendly attributes, and because of all of these developments it is undergoing a job creating manufacturing renaissance.
Since Lazar’s outlook for the U.S. was so positive, I decided to find out what the firm’s market outlook was, so we called Francois Trahan, one of Lazar’s partners and Co-Founders of Cornerstone Macro, the macro research firm they started last year.
Trahan, who has been on WealthTrack many times over the years, is the head of the firm’s investment strategy team. Trahan was ranked the #1 Portfolio Strategist by Institutional Investor in 2013 as he has been for 7 of the past 9 years.
Trahan has been bullish since the fall of 2011, when the recovery and the markets still looked very dicey. As you can see from this chart it was a very good long term call. Since then he has stuck to his guns and the market has proven him right. But what about now, with many of the world’s economies faltering, geopolitical risks rising and the U.S. stock markets regularly flirting with record highs? Well, he is still bullish! I asked him why.
FRANCOIS TRAHAN: Well, because the elements that have supported the rally are still in place. We’re one of the few countries in the world that have addressed our structural issues. If you think about the litany of things that people complained about five years ago, consumer leverage, we’ve come a long way. We had a big budget deficit problem. The sequester got rid of that. We’re now staring at a two percent deficit to GDP ratio. We have zero percent Fed funds rate, but I think the process of unwinding that is already in place, and we have an underinvestment cycle in the U.S. we’re starting to see a cap ex cycle which is very labor-intensive,and so the rest of the world is dealing with structural issues. Ours are largely behind us, but I would argue that the world’s problems are also America’s opportunity. Europe’s issues is having an impact on U.S. interest rates. It is artificially depressing U.S. interest rates, helping the consumer. China’s issues is having an impact on commodity prices. We have oil at $90 today, also helping the U.S. consumer.