Up, up and away we go. Stocks continue their rally this month, but economic fundamentals are showing weakness across the board. France is sliding back into recession and China’s industrial output is disappointing. This month, Executive sits again with Elie Khoury, chairman of Berytus Capital, and Nour Eldeen al-Hammoury, chief market strategist at Amana Capital, for their take on the markets.
Elie Khoury
Last time we spoke to Khoury, in November 2012 he was conservatively bullish on equities in the United States and recommended investing in Pfizer (up 15 percent since his recommendation as Executive went print), Kraft (up 19 percent), Microsoft (up 35 percent), Intel (up 10 percent) and Qualcomm (up 14 percent). The overall gain in the Standard & Poor’s 500 index over the same period was 18 percent.
> Still bullish? He remains bullish on equity markets overall, and especially US markets. With the inflation rate at 1 percent, below the Federal Reserve’s target of 2 percent, Khoury does not foresee the cessation of quantitative easing — when central banks inject money into the economy by buying up government securities — any time soon.
> Time to start investing in Europe? One can start selectively investing in Europe now, as it is cheap, according to Khoury. He would recommend the non-cyclical sectors such as the food industry and the pharmaceutical sector, as they are safer plays.
> Concerns in these markets? Khoury stresses that the market, spurred by cheap credit, has gone a bit ahead of itself and he remains concerned about the high US unemployment rate — currently at 7.6 percent — and European debt issues. However, he stresses that he is taking a more positive approach toward the markets today and would look to build position on any correction.
> Invest in gold? He would advise a net position of 3 to 7 percent of one’s total investable portfolio in this asset class and he says he believes the secular bull market on gold is taking a major hit. “I think in the short term the best days [for gold] are behind us and not in front of us,” he says.
> Top recommendations? In the consumer sector, he still likes Kraft and also recommends investing in Kellogg’s and Coca-Cola. In the pharmaceutical sector, he highlights biopharmaceutical company Amgen and an animal health business Zoetis, a Pfizer subsidiary that listed in February of this year. For the technology sector, he prefers Apple and Samsung.
Nour Eldeen
al-Hammoury
When Executive sat with Hammoury in November 2012, he was concerned about market fundamentals. Still, he recommended investing in the S&P Index (up 18 percent since his recommendation), Apple (down over 20 percent) and Facebook (up 28 percent).
> Still concerned with the fundamentals? He is less convinced about a further upswing in the US markets, given that the current levels fail to reflect the performance of the economy. “Equities across the board don’t reflect economic fundamentals, and they should not be at these levels at all,” he says.
> Main concerns? The Federal Reserve’s ballooning balance sheet at $3.3 trillion is Hammoury’s biggest worry. He expects quantitative easing to continue at least until the middle or end of the third quarter as central banks worldwide eventually lose control of inflation rates, forcing them to stop easing and start raising rates fast. He is also concerned about the worsening sovereign debt situation in Europe. “[Politicians] spent more than three years trying to solve Greece [which carries over] 400 billion euros of debt, and they did not even solve it that much. So how much time will it take to solve Italy, with more than 2 trillion euros of debt?” he asks.
> Top investment tips? Hammoury’s top recommendation is to invest in commodities such as silver and gold, which he recommends buying through exchange-traded funds. He also likes Asian currencies and would continue to sell the Japanese yen against a basket of currencies such as the sterling, the dollar and the euro. As for equities, he would stay clear of this asset class for now, and his only equity tip would be to buy Apple and diversify it by buying some Samsung stock as well.
