S&P Headed for Best Annual Gain Since '97

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Dec. 31 (Bloomberg) -- Green Square Capital Managing Director Lincoln Ellis discusses his outlook for the markets on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Thoughts.

Valuation and volatility and vectors.

Let's start first with valuation.

A lot of people say u.s. stocks have gotten so high, there is no good money left to make.

What is your take?

Probably not in terms of equity valuations in the u.s. and europe and market.

Fully valued in the u.s.. probably undervalued in emerging markets, though you have to be selective in the choice of which emerging markets.

Any good advice as to which one investors should focus on?

Yes.

We have organized it, focusing more on those with positive equity, those who have switched to more domestically organized and demand basis.

Those which have ties to europe, europe is really the story we like in terms of leaving the equity markets next year.

We think there is a symbiotic relationship, great relationships on import and export with europe.

Is that also impart with how much support we have seen here, whether the ecb?

Is it just that region's time?

A huge part of the equation, it has moved down 25 basis points in the second half of the year by the ecb.

The much more sympathetic monetary policy europe and japan gets ahead of the u.s. in terms of interest from investors looking for tailwinds in the equity market.

Clearly, you think there are opportunities for investors in the new year.

You mentioned volatility.

How much pain will the average investor have to put up with?

Volatility is the theme across all the major asset classes.

Six income and commodities.

We are at historic lows across all three.

More recently, we are in the lowest 20th percentile of volatility across all of the asset classes.

We expect with the movement by the u.s. central bank, the end of paper and things of that nature, that you will see an uptick in volatility really driven by interest rate differentials around the world, affecting foreign exchange and therefore affecting people's expected returns across all three asset classes that have been sitting at historic lows.

It is actually a reality check trade.

We have been way too babysat by central banks and we think the emergence of investing adolescence is a story for 2014. quickly, and vectors, what are you seeing?

They are a call on the size and scope of returns next year.

We think they will be muted and that is not a surprise to equity investors.

We think the downside is potentially exaggerated and commodity experts may see the first price rise in three years.

That would be welcome news for anybody in the commodities stage.

Bank as always.

Glad to have you with us.

Happy new year.

Joining us there, we are on the markets again in 30 minutes.

Market makers starts now.

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This text has been automatically generated. It may not be 100% accurate.

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