Still Very Optimistic on U.S. Equities: Koch

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Feb. 13 (Bloomberg) -- Katie Koch, Managing Director at Goldman Sachs Asset Management, discusses the worldwide economic outlook and her subsequent investing strategy. She speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)


Now we had that testimony from janet yellen, we have more of a glimpse of what she is thinking.

We are still very optimistic on u.s. equities.

On the one hand, you could say this is one of the world's most expensive equity markets and that might give investors pause.

On the other hand, bull markets don't die of old age.

If there is something that is going to derail the u.s., we don't see that on the horizon.

If we take a step back, i see a number of things to be positive about in contrast.

I would say first of all, you have strong balance sheets.

I would also say when you look at the u.s., you have a comment -- a, native -- accommodative monetary policy.

Margins are at peak levels but that strong growth that is going to come next year will be good for top line.

I think that is pretty optimistic for u.s. equity markets.

The only thing i would end with is when you have had such a big run, you need to be more selective about opportunities going forward.

Ask what do you buy in this kind of selective market is to mark it means that invest in these -- it means that investors have to be a lot smarter.

You want to look at the world bottom up.

We are still very positive on u.s. tech.

They have these very strong balance sheets, 15% of the market cap of those companies in cash.

Free cash flow yield, two times what has been relative to history.

When u.s. companies invest for growth, one of the things they are going to do is upgrade their infrastructure.

A lot of the u.s. tech companies should benefit from that.

One other place i would point out is u.s. real estate.

Everyone knows the u.s. residential real estate recovery has been taking place for some time.

Not a lot of news there.

Recently, there was a pickup in commercial real estate.

Particularly in tier two cities.

That is a place we are looking at too.

How does the u.s. stack up with the u.k., europe and japan?

What is your favorite second place to invest in?

I would go to japan next as a place that we are super positive about.

Being long japan and hedging out the currency was one of our best physicians in 2013. we have spent a lot of time thinking about whether we want to re-underwrite that positioning.

We are going to stick with it.

We have had dealt the currency.

It is pretty simple.

If you want to have a view on japanese equity, you have to have a view on the bank of japan.

We think that it is going to be one of the most accommodative central banks on the planet in 2014. to put that in context, if you look at asset purchases from the bank of japan, they are averaging 1.5% of gdp every month.

If we look at that on a relative basis, the accommodative monetary policy is about three times what the fed has been.

This is pretty dramatic, if we look at the fed and expected to continue to taper, the absolute magnitude might be bigger in the spring.

This is very positive for japanese equity market area what is your take on the u.k.? we heard from dr.

Carney yesterday.

He has done a canadian on all of us.

We are going to change it here.

There is a lot of wisdom.

I think that is actually quite a solid decision.

If we look at the impact here, i think what we have heard clearly is that we are going to be in an accommodative stance, rates are going to be lower for longer, and that is very good news for u.k. equity markets.

I believe investors should be looking at the small cap art of u.k. equity markets.

They are the part that is going to benefit most from this rebound.

What about emerging markets?

I just had a camera station with a cheap executive.

-- i had a conversation with a chief executive.

Possibly a bigger correction.

I think with emerging markets it is critical to separate out the strategic long-term positioning.

From a strategic long-term perspective, all clients should continue to have some exposure to these markets.

Something we say a lot is that this is still going to be the century for emerging markets but they might not and dying every year.

They didn't win last year.

There is lots of great companies.

They're going to deliver 70% of global growth.

However from a tactical's perspective, we argue there might be some merit in a short-term underway.

You have these big headwinds.

Whether it is the rising u.s. rates or whether it is the abating commodities.

There is a reason to be tactically underway.

Pulling that together has a reasonable position.

Take a tactical underway and the -- that is very clear.

You also have a paper out telling some of the pension funds what they should do.

They are looking at longer terms.

It is a different state of mind.

What are you telling them?

We actually just published a paper that took a look at the u.k. pension market area there is some really good news in there that i should highlight.

Great news for current and future pensioners and great news for corporates.

There are two things that can help pensions.

If rates go up, that is good because liabilities decreased.

If risky assets do well like equity markets, that is good because the return generating portfolio will increase.

We talked about written the u.k.. they are probably not going to get up much.

We need to focus on the return generating part of the portfolio.

Trustees should sharpen their pencils and make sure they have full exposure to risky assets.

Hopefully they will invest in some the markets we talked about today.

Thank you so much for all your analysis today.

12 minutes from now it is "the pulse." i am joined by guy johnson.

We have a pretty packed show.

We will be talking italy and fast cars.

We will.

Italy and fast cars go hand-in-hand.

That is an obvious thing to do.

We are going to be talking about bugatti.

Orm, what is orm?

Online reputational management.

It is a growing area, something you have to think about if you are a ceo.

We have the king of orm.

He has pioneered how you deal with disasters online, how you manage your reputation.

We will talk to him about a

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


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