Economist Gary Shilling predicts at least five more years of slow U.S. growth are ahead, but still envisions a range of profitable themes for smart investors who are selective, according to Business Insider.
The gulf between a truly robust stock market and one propped up by easy government monetary policy has produced a “Grand Disconnect” that “has spawned many distortions and a zeal for yield that almost completely ignores financial risks,” he wrote.
Against that cautionary backdrop, Business Insider gleaned a number of “risk-on” strategies from Shilling’s writings that are believed good for now, but that could change as the year progresses.
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Shilling still views Treasury bonds as his “best investment to date,” according to Business Insider. He expects the 30-year bond to continue to appreciate because of slow economic growth, deflation and accommodative monetary policies.
He also looks favorably on the securities of companies that pay “substantial and increasing dividends,” he wrote.
The low-priced luxury category is another opportunity, according to Shilling.
“We think manufacturers and retailers that can adapt to the demand for small luxuries will continue to be winners in the current environment,” he said.
Consumer staples and food are also good bets for the present time, according to Shilling, as are technology companies with products that enhance productivity.
For the time being, the dollar should appreciate against other currencies, especially the yen, Shilling predicted.
Shilling was also upbeat about selected healthcare providers, writing that aspects of the current American health care system “almost guarantee explosive growth and maximum cost,” even as the aging population places more demands on medical care.
Because younger American may view owning a home to be a poor investment, he believes rental apartment investments will benefit.
Finally, he likes North American energy producers because of the “national resolve to reduce imports from unreliable foreign sources,” Shilling wrote. He does not include renewable energy sources in that outlook because of their dependence on government subsidies.
Meanwhile, MarketWatch reported, Shilling still believes the overall stock market is headed lower — considerably lower.
“With a global recession depressing corporate revenues, unsustainable profit margins and currency translation losses spawned by a robust dollar, I see S&P 500 operating earnings of $80 per share next year. That’s a quarter below Wall Street consensus. Throw in a bear market P/E [price-earnings ratio] low of 10 and the S&P 500 Index drops to 800, a 42 percent decline,” he said, according to MarketWatch.
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