Consuelo Mack of WealthTrack recently conducted an interview with Nancy Lazar and François Trahan, both founders of the new macro strategy firm, Cornerstone Macro LP. Lazar and Trahan note in the interview that macro economic influences have an outsized impact on equity market returns. In this regard, they believe middle America is the new emerging market. In relation to this viewpoint, they both highlight factors that will be headwinds for emerging market economies over the next five years or so.
During the interview, Lazar and Trahan note the energy renaissance taking place in the U.S. will likely be a game changer for the U.S. economy over the course of the next 3-5 years. One statistic Nancy highlights is that for every one energy job created in the U.S., three additional jobs are created in other business segments. This job creation multiple will have a positive impact on consumer and industrial related stocks.
Francois Trahan mentions where dividend stocks have been an important focus for investors through the end of 2012, during the next three to five years, dividends will be less impactful to equity returns. In looking at the year to date returns for the S&P 500 (yes, a short time period), dividends have accounted for about 10% of the returns generated by the S&P 500 Index. Trahan believes the market/economy is in a period similar to the 90's where dividends did not account for a large part of equity returns. Trahan believes the U.S. will enjoy a period of low inflation that will enable PE expansion to be a driving force for equity returns. The below video is a worthwhile one to view.