“The US stock market will climb near its all-time high by the end of the year”
The upheaval on Wall Street is in full swing, investors seek direction amid the tangle of uncertainties over the war in Ukraine and inflation in the Western world, but a conversation with Larry Adam, chief investment officer at Raymond James , can inspire optimism even in those gripped by fear. “It’s true that the S&P 500 is down 14% from its peak, but historically when there’s a 10% to 20% drop, the market tends to recoup those losses in about five months, provided that ‘no recession is starting, and I don’t think we are facing a recession. Therefore, the US stock market will recover by the end of the year and even return to a point that will be close to its all-time high Adam told Calcalist in an exclusive interview as part of the Sohn’X Tel Aviv Investment Conference, taking place for the second year in conjunction with Calcalist. The conference includes remote interviews with speakers from the biggest and of the world’s leading investment organizations.
The conference, which will benefit Silent Angels, Israel’s Rett Syndrome Association, will feature six events hosting leading global investors, with the first five being held online and the sixth in person in June.
Lawyer Shmulik Zisman, founder of Silent Angels, said: “My daughter Hadar was diagnosed with Rett Syndrome when she was two and a half years old. It was the most difficult day of my life. A quick internet search revealed that girls with Rett Syndrome eventually reach the state of one hundred percent disability and death in adolescence. I look at her, such a beautiful girl, like any other girl. But it turns out there was a cruel and destructive mutation in his genes.
Zisman added that “one in 10,000 girls is born with Rett syndrome, regardless of race or ethnicity. The syndrome is not hereditary and can affect any family in the world. The Association Israeli Rett Syndrome Association works in conjunction with its corresponding organization in the U.S. Over the years we have been able to cure model animals and are very close to gene therapy clinical trials for the girls themselves.
According to Dan Gillerman, former Israeli Ambassador to the UN, Chairman of Blackstone Israel and Chairman of the conference: “Sohn’X TLV is unique in that it allows participants to succeed and at the same time contribute to the society,” Gillerman said. “You will succeed by learning, listening and receiving enriching information from the best people in the field, and you will contribute to society by donating all profits to an organization active in the search for a cure for Rett syndrome.” 2(סי
We asked Larry Adam: Aren’t you afraid of the impact of the war in Ukraine and rising energy prices hurting many businesses?
“No. The invasion started on Feb. 24, and if you look at the performance of the market now, it’s already looking beyond unfortunate events. The S&P 500 is up more than 8% since then. A lot of people are would expect international equity markets to fall. They have fallen, but they have made up for their losses. Bond yields have fallen in search of protection, and now they are 40 to 50 basis points higher than they were on the day of the invasion Gold also came back at a lower price What I mean is that in many cases when there are events like this, there is an automatic response, but over time those reactions tend to pass, and the market started to go up, especially the capital markets.”
What about the Fed’s interest rate hike, the second event affecting investors? How many more increases beyond the one in March do you expect?
“That’s the big question for the market right now. It’s very important to see how quickly expectations have changed about what the Federal Reserve plans to do this year. If you remember the end of the last summer, interest rates were not expected to rise this year, and now we expect nine increases this year and three more next year. we’re going to get out of the situation we’re in now where the interest rate is 0.25% to 3% I think that’s too aggressive and the interest rate the interest rate won’t go up 2-2.25% There are two reasons: the first is that if you go back to 1980, in each of the interest rate tightening cycles, one after the other, the peak next in the interest rate was lower If you look at that trend it will take you to that 2 to 2.25% number The second thing we rely on is the fact that the EC America’s economy, and indeed the global economy, has become much more sensitive to interest rates. than previously. Here in the United States, for example, mortgage rates have risen to 5%, corporate bond yields, mostly small businesses, are above 6%, and those are things that could slow the economy. Another reason for our lower interest rate outlook has to do with supply chains where we are seeing early signs of easing. The amount of freight and shipments that have been accumulating are decreasing, delivery times are decreasing, inventory levels are now where they were before the pandemic, and as a result, a drop in transport prices is beginning, both by sea than land. ”
What do you think of commodity prices? Do you think that even there the worst is already behind us?
“The longer they stay high, the higher the likelihood of a recession beginning. Looking specifically at energy prices, we think oil prices have likely already peaked. Over time, if there is any kind of ceasefire or peace agreement, oil prices will return to $90-95 a barrel, however there is no doubt that this is not a return to the sub-$80 level we saw before the Ukraine crisis, as much of the sanctions against Russia are likely to remain in place even after any ceasefire that is formed. That’s another story. And I think it’s a very important time of the year, when, for example, Ukrainian farmers have to sow their crops, because if they don’t, it could lead to more shortages. of products such as wheat, because Ukraine is the “breadbasket” of the Euro eg.
Overall, you’re fairly optimistic, although investors are troubled by signs of an impending recession, such as the inverted yield curve that usually heralds it.
“We respect what the yield curve is signaling and in the last six recessions there has been a reversal before, but we don’t mind that. A yellow flag has been raised over the US economy, but the economy needs to be examined in depth and all the indicators that we tend to look at show that the economy continues to be strong I really like the withholding tax index because it shows corporate tax payments on a These are now higher than ever and increasing at a rate of 20% per year, this shows that the labor market is healthy and above all that the American consumer will have money to spend.Another interesting index is our real-time mobility index, which looks at hotel room reservations, restaurant reservations and airport activity.There is a jump in each of these and that means consumers are becoming more assets and cons how more. Against this backdrop, we expect the U.S. economy to grow 2.5% this year, having lowered the previous forecast of 3.5% following the war between Russia and Ukraine.”
Coming back to war and sanctions, how will the shutdown in Russia affect US companies and how will this translate to financials?
“We’ll see updates from companies regarding the impact of events in Russia, but it’s worth remembering that most S&P 500 companies have relatively low exposure to Russia and Ukraine, so I’m not sure. don’t expect a significant impact. Besides, if there’s a quarter where you can talk about these effects without suffering the consequences from investors, it’s this quarter. I think that in addition, the next release season will be pretty good, including in the high-tech sector, which has been hit hardest by the stock market in recent months.”
In conclusion, what are your recommendations for an investment portfolio in a tumultuous 2022?
“We still prefer equities to bonds, within equities we prefer the US and in the US the more cyclical sectors like energy, financials and industrials. Our most defensive sector is healthcare. Internationally, we are optimistic for Asia because with the end of the shutdowns in China, growth will continue to be rapid and inflation in Asia is less aggressive than in the rest of the world, which gives more flexibility to the central banks. According to our estimate, China could even lower its interest rates.”
Rett syndrome is a non-inherited neurodevelopmental disorder that occurs primarily in girls (approximately one birth in 10,000 girls). The syndrome is characterized by normal development in the early stages of life, followed by various disorders: loss of speech, loss of use of hands, gait disturbances, irregular breathing and indigestion. Despite the difficulties they face, girls with Rett syndrome have intelligent and expressive eyes. They come into contact with their environment with their eyes. They are active, vital and full of zest for life, and it is for this reason that they are affectionately called “Silent Angels” all over the world.