Expert sees economy’s way ahead



Market outlook information I’m am sharing with you today comes from Laks Ramachandran, director and senior market strategist with U.S. Trust, the investment strategies group at Bank of America. He spends a good part of his time advising high-net-worth clients on where best to invest their money. Here’s what Ramachandran said last week:

• 2009 was a great year for people who believed in the markets, but “sadly, many stayed away,” he said. Investors sought refuge in bonds rather than equities, even though markets improved dramatically throughout the year.

• 2010 is a pivotal year, on the cusp of a better-than-expected (continued) recovery. If last year was “sour and dour,” 2010 will be a year when people begin to believe that we are “clearly out of the woods.”

• Other factors affecting markets this year: Changes Congress might make to banking regulations and to federal tax law, how Congress deals with health care reform and whether government will continue to stimulate the economy.

• Meanwhile most of the announced economic stimulus money has yet to have an impact, Ramachandran said.

• Monetary policy in the form of interest rates on borrowed money is expected to change this year with the Federal Reserve slowly increasing rates.

• The U.S. economy (and the world’s) will gradually transition from a recovery rich with assistance from governments to one with traction coming from the private sector. “It will be interesting to see how much of the recovery will be self-sustaining led by the private sector,” he said.

• This will be the year of some job gains, starting this quarter.

• Ramachandran does not see 2009 markets as overbought and due for a big pull-back. Instead, he expects the world’s economies to see a “synchronized” pickup. “But the shock to the (economic system) was so severe that it will take three or four years of catching up to the (long-term) market trend lines,” he said.

• U.S. exports will drive domestic economic growth, gaining traction longer-term. Sectors that will see the most business: defense, capital goods and high-tech goods, he said.

None of this improvement will come overnight because of the “extreme slack” in the system, he said. Ramachandran’s optimism on exports comes from a fundamental rebalancing of global economies with emerging markets such as China and Brazil buying a much greater percentage of the world’s goods. “We definitely are in the camp where we see U.S. exports ramp up,” he said.

So where should investors put their money this year?

• Energy.

• Materials.

• Industrials.

• And information technology businesses.

How about banks, beaten to a pulp in the past year? Nope, Ramachandran says. The cloudy picture for financials to continue. For him, a nice diversified portfolio of U.S. large-cap, high-quality companies, balanced with emerging market opportunities, is the way forward.

Julia Anderson is The Columbian’s business editor. Reach her at 360-735-4509 or