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More bold financial predictions for 2012: Part Two

moneylogo040411_optBY WARREN BOROSON
BOROSON ON MONEY
NEWJERSEYNEWSROOM.COM

John Longo believes that Apple remains a splendid stock, that residential real estate will end the year close to flat, that high-yielding investments will remain in favor. (One he likes: Schafer Cullen High Dividend Fund, yielding 2.6%.)

Dr. Longo is a clinical associate professor of finance and economics at Rutgers Business School, a principal in a $100 million hedge fund, and chief investment officer and chairman of the Investment Committee for The MDE Group (www.mdegroup.com), a registered investment adviser with $1.4 billion under management. The MDE Group was ranked the fourth best independent investment adviser in the U.S. by Barron’s in 2007 and 2008.

Here are this replies to specific questions:

Q. How far up (or down) will the S&P 500 be in 2012?

A. Election year politics will hold the market hostage – with sideways and volatile movements – until the results of the election become known. We believe the U.S. stock market will follow the pattern best illustrated by what occurred surrounding the 2004 U.S. Presidential election (Bush vs. Kerry). Namely, a volatile but range-bound market that will ultimately exhibit a significant move once the election results become known or widely anticipated.

We believe the market will increase post-election if the winners (President plus Congress) have a substantial, pro-growth platform -- while it may falter if it becomes clear that a continuation of massive deficit spending policies rule the day.

Q. Will residential real estate revive?

A. Real estate prices at the national level will likely continue to bounce along the bottom in 2012, ending the year close to flat. Markets with strong job growth (e.g., Texas, North Dakota, Silicon Valley) will likely experience price increases, while those still working off speculative bubbles (Nevada and Florida) will likely continue to fall, albeit at a lesser rate.

Low interest rates and modestly improving fundamentals will likely be offset by a continued large inventory of foreclosures, as well as the “shadow inventory” of homes that will be put on the market once prices rise. longoJohn011312_opt

Q. Which particular mutual funds might do well?

A. In a sluggish economy beset by gridlock, we believe yield-oriented investments will be an important theme in 2012.

Capture yield from alternative sources in a low-return environment for stocks and a low-yield environment for high grade bonds.

With short-term Treasuries and money market funds providing close to zero yields, we have had to search elsewhere for income-generating investments. In our view, there are a range of quality investments, such as the SteelPath MLP Alpha (6.5% yield), Loomis Sayles Strategic Income (5.9% yield), and Nuveen High Yield Municipal Bond (7.3% yield) funds. For equity funds, we like the Schafer Cullen High Dividend Fund (2.6% yield).



 

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