Fonds Exklusiv – By Bettina M. Gordon
Her forecasts are legendary, as they are precise and accurate. Her indicators are currently bullish, and she is in excellent spirits. No wonder—the fund she manages has already achieved a 25 percent increase in value. So it is the perfect time to invite market strategist Elaine Garzarelli for an interview.
There are only a few Wall Street analysts and strategists who have managed to stay relevant for decades. One of them is undoubtedly Elaine Garzarelli, who was hailed as a “legend” by the U.S. media after accurately predicting several stock market crashes and bear markets. Well-known television networks such as Fox Business, PBS Business, and CNBC regularly invite Garzarelli to appear on air. FONDS exklusiv spoke once again with the “First Lady of Wall Street” (Investor Guide) for the third time about the markets, the President, and Ben Bernanke’s next move.
FONDS Exklusiv: Ms. Garzarelli,
You became well known for accurately predicting the stock market crashes of 1987 and 2000, as well as the bear market of 2002. The year 2012 has been very positive so far. What are your general expectations for the second half of 2012?
The S&P 500 Index has risen by ten percent since the beginning of the year, which is very encouraging. The major strength of the current situation is certainly the low interest rate environment, which will hopefully remain roughly the same until 2014. This means an improvement in both residential and commercial real estate markets, as well as a higher price-to-earnings ratio in the S&P 500.
Concerns about the Eurozone are not as pressing at the moment, since the European Central Bank has pumped more than one trillion euros into the banking system. However, problems in Spain and the slowing economic growth in China are not yet off the table. We would only start to worry seriously about the U.S. slipping into a bear market if the Federal Reserve raised interest rates or if the price of oil rose above $150 per barrel. Another concern would be unrest in the Middle East, which could fuel fear and further conflicts.
The Dow Jones Industrial Index
The Dow Jones Industrial Index has once again risen above 13,000 points — a level we last saw in May 2008. Which sectors, in your opinion, will continue to perform well?
Federal Reserve Chairman Ben Bernanke has certainly taken on a leading role. Months ago, he suggested that there could be another stimulus package — QE3 (Quantitative Easing 3) — which started the rally. If we look at the sectors since the beginning of the year, the leaders are information technology, financials, and consumer goods. We continue to like these sectors and also recommend energy, industrials, and commodities. The semiconductor industry will also be strong, as both its earnings potential and valuation are quite favorable.
Are you satisfied with how FED Chairman Bernanke has handled the financial crisis so far?
Elaine Garzarelli: The Federal Reserve’s monetary policy provided as much support as possible under the circumstances. In my opinion, Ben Bernanke managed the fragile financial environment well through QE1 and QE2. If the economic situation weakens, the FED has several options to deploy QE3 as a countermeasure.
From the minutes of the last FED meeting, it appears unlikely that QE3 will be implemented in the coming weeks. However, during the June meeting or in the second half of the year, it is quite conceivable that the FED could take that step.
