Barron's interviews Jason DeSena Trennert, chief investment strategist with Strategas Research Partners. Trennert sees inflation in our future, and thinks investors can capitalize by investing in commodities, companies with exposure to energy and commodities, and Treasury inflation-protected securities (TIPS).
Trennert notes the Fed's balance sheet has tripled recently. That, and the magnitude of Obama's stimulus - which is driving deficits towards 15% of GDP - "makes it virtually impossible to stick the landing on inflation."
Say hello to the long-lost art of stockpicking
Trennert says the coming period will be a boon for dexterous active money managers, who will benefit from trendless zig-zag markets. Meanwhile passive money managers (read: buy and hold), who loved the P/E-multiple growth of the '80s and '90s, will struggle. Another outgrowth of this shift will be the large divergence between the winners and losers. "This is going to a be a period in which the truly active manager who is not afraid to trade around positions or to have more turnover will do better than investors who are basically just picking stocks for the long term."
While not entirely discounting the recent improvement in credit market conditions, he doesn't see how that equates to a 30% rise in the S&P 500 and an 80% move in the S&P Financials. His best advice for retail investors: lower their expectations about returns.
Stocks he likes
- Lazard (LAZ) - midtier brokers don't have the legacy issues, and are likely to usurp market share and talent from their bigger brethren. Lazard also has a traditional money-management business that will boost earnings.
- Altria (MO) - there's a good chance the FDA will begin regulating tobacco sales, which will freeze MO's dominant market share.
- Schlumberger (SLB) - the oil service sector is a good play on higher oil prices; Trennert predicts $50-75/barrel crude.
- SPDR Gold Trust ETF (GLD) - once global investors realize there's a limit to what the U.S. can fund easily, they'll move away from the dollar into "hard currencies."