Joe Rosenberg, former CIO at the conglomerate Loews and Wall Street veteran, is bullish on the market long term. Rosenberg, who has been involved with the markets for over 50 years, says the S&P’s 15-year trailing return of 3.8% annually sets the stage for above average annual returns looking 15 years out as stocks revert to their long term average return.
He thinks that low returns for equities are impacting behavior. Specifically, he cites the example of California pension funds, CalSTRS, who recently announced a significant reduction in exposure to US stocks. Rosenberg believes now is the time to be increasing equity exposure, not decreasing it, and pensions and institutions should all be backing down their exposure to hedge funds and private equity.
Commenting on energy, Rosenberg sees two scenarios playing out for oil. The first is that OPEC and non-OPEC producers could come together to lower output, effectively reducing supply to boost the price of oil. The other scenario is no agreement between OPEC and non-OPEC members, resulting in a price drop to $25-$30 a barrel of oil. Under this scenario, many producers could get “knocked out” leading to a quicker price reversal. Rosenberg highlights a few large cap names that look attractive, including Chevron, Ford, GM, JNJ and Pfizer.