Renowned mutual fund manager Bill Miller of Legg Mason sees good things ahead for stocks this year. As for bonds, not so much.
“The great bond bear market has begun, starting with Treasurys, which should see years of losses as interest rates gradually normalize,” he tells The New York Times.
The 10-year Treasury yield closed Friday at 1.88 percent, up 50 basis points from July’s record low.
Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.
Meanwhile, “Equities, which outperformed bonds in 2012, will continue to do well, driven by rising earnings, strong free cash flow, solid profit margins, low inflation and attractive valuation relative to bonds,” says Miller, who manages Legg Mason Capital Management Opportunity Trust.
Companies are in the midst of reporting fourth-quarter earnings now. Analysts forecast a profit gain of 3.3 percent for Standard & Poor’s 500 companies during the period. And companies generally find a way to exceed expectations.
“The path of least resistance for stocks and the economy is higher,” Miller says. “The chief risk is the dysfunctional political environment.”
One expert who doesn’t share Miller’s enthusiasm for stocks is Marc Faber, publisher of the Gloom, Boom & Doom Report. He says markets around the world may fall up to 20 percent this year.
“Earnings could disappoint, fiscal issues aren’t resolved,” Faber tells CNBC. “Tax increases and more spending will have a negative impact on the economy.”
Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.
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