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Are We Reaching a Turning Point in the Market?

Portfolio Manager Alessio de Longis provides his insight into what’s ahead.

Highlights:

  • Investors should be very careful about historical correlations
  • We believe dips in the equity market are careful buying opportunities

Aired: January 27, 2014 on Bloomberg 

Host Erik Schatzker: Is 2014 going to be a year in which you, so to speak, see the men separated from the boys? You can’t just be long and strong and hope for the best; or long developed markets short emerging markets and hope for the best.

Alessio de Longis: Exactly, I think it’s a year where we need to be very careful about historical correlations and we have to think creatively about the opportunities set. This is a year just like 2013 where, in my opinion, valuations and fundamental depreciations really play a role. Now these environments are very rare, they occur at the turning points of the market. Well we tend to focus, when we do statistical analysis, we tend to focus on the middle part of the cycle when the momentum builds in; but at the turning points the correlations break down. You have to be more creative and constructive about the opportunities set.

Host Stephanie Ruhle: I.e. things just got hard.

Host Erik Schatzker: Yeah, if 2014 isn’t the year that we enter a major correction or a bear market, that could be on the other side of this?

Alessio de Longis: Exactly.

Host Erik Schatzker: Something to be scared about or not? I mean this is what everybody wants to know, is the period that we are entering something to fear?

Alessio de Longis: I don’t think so, personally I see dips in the equity market as careful buying opportunities and frankly also the outlook for most fixed income investments, I think we tend to be a little bit to bearish on them. When you start factoring in what is priced in, in fixed income markets and you start factoring in how steep those yield curves are; selective exposure to fixed income will still pay off in some cases, in my opinion, equity like returns.

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