It’s nice to be able to focus on some positive news for a change and as you will discover in a moment, this week’s guest is one of the most upbeat Financial Thought Leaders out there right now, at least for the next several months. Here are some developments he’s following that might lift your spirits as well.
[expand title=”Read More” trigpos=”below” swaptitle=”Hide Text”]The devastation in the housing market, the largest asset held by many Americans, appears to be healing and improving. Although still at depressed levels, new home construction- called housing starts in the trade- recently rose to the highest level in nearly four years. And confidence among home builders climbed by the most since 2002. Even Federal Reserve chief Ben Bernanke noted the “modest signs of improvement in housing” in his otherwise somber remarks recently. And for those of you contemplating buying a home, they have never been more affordable. The U.S. Housing Affordability Index is at a record high due largely to record low mortgage rates. Of course qualifying for a mortgage is another matter! It is still difficult for many Americans.
Another positive trend: inflation. It is decelerating. We can thank falling oil prices over the last few months for putting more money in our pockets. The Fed now predicts that its favorite measure of inflation, the Price Index for Personal Consumption Expenditures, or PCE, will be under the Fed’s targeted 2% level and below last year’s 2.5% rate- not only a boost to the economy, but giving the Fed some flexibility to provide more monetary stimulus if it sees the need. By one count, there have been well over two hundred stimulative policy initiatives around the world in the past eleven months. That’s a lot of economic juice.
Meanwhile, as this week’s guest has been telling clients recently, investor sentiment is as low as it’s been since the financial crisis. Investors are still net sellers of stock mutual funds and buyers of bonds, even though a record high number of stocks, about 60% of S&P 500 companies, now pay dividend yields greater than the yield on the ten year U.S. Treasury note.
Our guest this week is Francois Trahan, Vice Chairman, Chief Investment Strategist and Head of Quantitative Research at investment research boutique Wolfe Trahan. Institutional investors have ranked him either the number one or number two portfolio strategist on Wall Street for the past eight years. He is also co-author of the recently published book, The Era of Uncertainty: Global Strategies for Inflation, Deflation and the Middle Ground, which I highly recommend. I began the interview by asking him why, after several years of bearishness, he turned bullish last October.[/expand]