WASHINGTON --Mutual funds remain a sound investment choice, and will, once again, grow through the perseverance of American ingenuity. Investment firms must stress this to investors to restore their faith.
Nonetheless, fund advisors must still search for new investment solutions, disclose risks and performance more clearly and strengthen 401(k)s through automatic enrollment and additional tax advantages.
Those were the resounding messages of the opening sessions of the Investment Company Institutes General Membership Meeting, Extraordinary Times--Steadfast Commitment.
Although unemployment is likely to still grow worse, and will be the last economic factor to improve, the recession will begin to wane by the end of the year, and the U.S. equity market could end the year up 20%, 30% or potentially higher.
Until the labor situation moves to a more comfortable level, it will be a protracted recovery period, warned Abby Joseph Cohen, senior investment strategist and president of the global markets institute at Goldman Sachs. A key component of this recovery is the restoration of consumer confidence, in which Cohen sees mild improvement. Consumers now understand the drivers of the market and will begin to feel much better, she said.
The stock market, however, is another situation, and will recover before the overall economy, agreed Cohen and famed stockpicker Bill Miller. The S&P 500 Index, which bottomed out at 667 on March 9 and ended Wednesday at 920, will close the year between 1,000 and 1,050, she said. Miller, chairman and CIO of Legg Mason, was even more optimistic; he expects the index to be fully valued between 1,100 and 1,200 by year-end.
Everything is on sale except for Treasuries and gold, Miller said. I like everything from the quality end of the market, those stocks with good yields, strong dividends and 12 times earnings, and bargains on the other end. Emerging markets, particularly, present opportunities, Miller said, having already risen between 15% and 40% so far this year. And credit presents great opportunities across the spectrum, broadly, he added.
Over the next two years, Cohens favorite pick is U.S. equities. For Miller, its U.S. financials, and for James Anderson, chief investment officer of Bailie Gifford, its alternative energy.