September 30, 2014
By Aparna Narayanan
Investor’s Business Daily
“Stephen Blumenthal, CEO of CMG Capital Management in Philadelphia, with $600 million in AUM:
While the market is modestly overpriced, the trend remains positive and the Fed supportive. “Don’t fight the Fed” remains the important theme. However, the market is expensive, the cyclical bull is aged and the Fed’s quantitative easing policy is ending. Risk is high.
I believe rates should stay lower and for longer than what most might expect, which should support U.S. equities in the interim. The worst is yet to come as it relates to a sovereign debt crisis. It is reaching an advanced stage in Europe and Japan right now. I see their economic decline advancing and ultimately affecting us here until late 2015.
We are at the tail end of QE, and Europe and Japan are at the beginning. Our interest rates are currently higher than theirs, our overall debt is lower and our demographics are better. That favors the dollar for now, as well as U.S. equities.
It is widely anticipated that the Fed will begin to raise rates in mid-2015. It is typically the third rate rise that causes the market to change path (remember the “three steps and a stumble” rule). So my advice is to stay long equities but hedge that exposure and increase weightings to tactical ETF strategies. I believe Japan’s stock market will rise, but their currency will decline meaningfully, especially against the dollar. I favor the currency-hedged WisdomTree Japan Hedged Equity (ARCA:DXJ).”
Read the full story in IBD: ETF Experts Cautious Amid U.S. Economic Strength.