Steven Einhorn, vice chairman at Omega Advisors says over the next 12 months the S&P 500 can deliver a total return of six to eight percent.
Fresh from the right of global investment outlook I'm I'm joined by Steven Einhorn. Vice chairman actually invited Steve thank you so much for joining me. So it stayed out of the US equity markets have not performed as strong as you predicted. Enlightened that we AG UCS and 500 added. 26 to eight. You're correct. I thought when the year started. That DS and he could delivery total return. Between seven and 9%. It currently has a total return of about 3%. So I have the direction right but the magnitude has been a bit light. Notwithstanding that I do believe over the next twelve months. That the S&P 500 is representative. Of the average common stock in the US can deliver a total return. Between 6% to 8%. Most importantly I think stocks a year from now will be higher than they are currently. Signs do you think. That we might be coming cute and able market. Virtually no signs. A fee that suggest we're coming to the end of the bull market too important. Items that have historically signaled. The end of global market are the scent of recession. And very tight monetary policy. All of the work that we do suggests that this business expansion that we are currently. Experiencing has number of years left in it. So from that perspective it would be way too early. For this. Bull market to be over. The S&P typically peaks. Six to eight months prior to a peak in economic activity. If I'm correct this economic expansion has years to go. Way too early for the bull market to be ending and secondly in terms of monetary policy. We expect. That powers Central Bank will lift the Fed Funds rate in December. For the first time in the number of years. Nobody would characterize this as tight money policy so we have neither. He fed which is problematic too. However equity market gored economic expansion. That is problematic so I expect the bull market will last for quite awhile longer. I used that that hasn't put fish hit. Be on the piece of hikes vs went exactly the fat raise rates Tomlin and about that what is important. And even though investors have obsessed with when is the first fed. Rate hike. That to me is an obsession that is unwarranted. If one looks back historically. The S&P 500 has never peaked. Coincident with the first Federal Reserve rate hike. The average is a bit about thirty months after the first Federal Reserve hike. And the shortest period of time. He's ten months after the first hike that the S&P 500 peaks the what is really important is not when does. The Fed first rate raise rates it what is the pace. The repeated the of that hiking and we expect that they will go very slow. In their tight. Now and this type of us slow growth environments. What sectors do you think might outperform. In a slow growth environment where it is admittedly difficult for companies to generate. Sizable revenue growth. We want to focus on those companies that can deliver. Above average. And sustained. Above. Revenue growth. Better than the average company. And we find many of those companies in technology not so much the hardware. Sector but in the software. Area. And we find some in what is now in more controversial. Sector health care. And perhaps given where oil prices are and our expectation they could move higher we will find some in the energy area as well. But two areas that do. At least historically we've thing going forward provided above average revenue and earnings growth. Above average dividend growth intelligent capital allocation. Is the tax sector and health care. Arid area haven't thanks to Steven Einhorn album it advice says. And Lee Dong Kim and this is winners.