Expert advice on how average investors can navigate strengthening U.S. and global economy

  • Article by: PATRICK KENNEDY , Star Tribune
  • Updated: December 28, 2013 - 7:11 PM

Stock markets shrugged off scary headlines to set record highs in 2013. Now economic indicators are finally validating investors’ faith. “We no longer believe that every new thing is going to be the end of the world,” said one of our experts.

U.S. stock markets hit all-time highs in 2013. Oh, and the economy did not fall off the fiscal cliff.

Yet growth is slow and the U.S. unemployment rate remains ­unacceptably high at 7 percent.

The Federal Reserve tapped the brakes on its easy-money strategy on Dec. 18, saying it will slow or “taper’’ the massive bond-buying ­program from $85 billion a month to $75 billion starting in January.

We asked nine of the Twin Cities’ leading investment ­professionals to help the average investor navigate in the strengthening U.S. and global economy. Most members of the Star Tribune’s Investor Roundtable had predicted that the taper would begin in early 2014. The Fed’s initial move is relatively small and there could be a long way to go before the Fed ends its unprecedented policy.

Q: Last year at this time a major worry was the looming fiscal cliff. As we start 2014, what are the major worries to navigate today?

 

David Joy, chief market strategist, Ameriprise Financial: Well I think you have to start with the Fed, at least that’s how I think of things. I’m not sure we’ve seen much ­reaction yet.

 

Carol Schleif, regional chief investment officer, Abbot Downing: The biggest thing right now is that the margin of error, the margin is less. [Stock] valuations are richer than they were a year ago. It’s great, particularly as an equity investor, to be playing when fundamentals are strengthening but nobody believes it. Now everybody believes it, but the issue is where else do you go?

 

John De Clue, chief investment officer, The Private Client Reserve, U.S. Bancorp: I think the Fed’s going to be watching the housing market more closely than almost anything else. Their attention has to be heightened by the back-off that we’ve seen and some of the slowdown in housing activity.

 

Erica Bergsland, director of research and trading, Advantus Capital Management: Well I think the Federal Reserve is very conscious of this uneven recovery, and I think that will cause them to maintain easy-money policy longer than people expect.

 

Russell Swansen, chief investment officer, Thrivent Financial for Lutherans: I agree with that. I think they’re very concerned about employment, and I think that they didn’t explain that well early this year.

 

Jim Paulsen, chief investment strategist, Wells Capital Management: The market makes two assumptions often around the Fed. One is that the Fed’s in control of [the economy]; I don’t think they are most of the time. Secondly is the idea that we’ll have this nice, controlled, slow linear path out of the policy — which almost never happens historically. The way policy typically changes, almost all the time, is by panic.

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