History Indicates Stocks Near Bottom: Wealth Manager
Timing is everything, says Jack Ablin, chief investment officer of wealth management firm Cresset Capital.
That means you should match your investing to your time horizon. The sooner you want to spend your money, the safer you should be in your investing.
And that means bonds for short-term investing, says Ablin, former chief investment officer at BMO Harris Bank. Longer-term horizons mean investing in stocks and private equity.
Meanwhile, Ablin thinks the stock market is close to bottoming and particularly likes three companies in the food and energy sectors.
TheStreet.com: What is your investment philosophy?
Ablin: It’s insulating clients’ lifestyles from the vagaries of the markets. We define lifestyle in terms of cash flow to meet their goals.
We have three basic strategies. One is diversified income cashflow, with a timeline of three to seven years. Another is growth cashflow, with a timeline of seven to 15 years. And the third is aspirational cashflow for 15 years and beyond.
We align the three strategies to make sure cash is available when needed and growth is there when desired.
TheStreet.com: What kind of investments do you use for each of the three strategies?
Ablin: For the diversified income strategy, we’re more focused on income, less on growing principal. We primarily invest in high quality bonds—Treasuries, investment-grade corporate bonds and municipal bonds.
The growth portfolio is more equity-oriented, with mostly stocks—diversified globally, but biased toward the U.S. We like mostly quality and dividend stocks. We also put some money in private equity and real estate.
The aspirational strategy include thematic investing and private investing, such as venture capital. The goal is purely return.
TheStreet.com: Where do you think the stock market is headed?
Ablin: We’re in a cyclical downturn, and we think the downturn is just related to [fear of] recession and earnings. If we are in a cyclical downturn, we’re near the bottom.
Typically the downturn entails a 15% to 20% drop in the market, which we’ve already had. And it typically lasts one to three years. So far it’s been 10 months. I would expect the market to return to its January 2022 record highs by late 2023 or early 2024.
Jack Ablin, chief investment officer at Cresset Capital.
TheStreet.com: What are some of the stocks that you like?
Ablin: Three are in the quality, dividend strategy. We particularly like food and energy stocks, because we have passed peak globalization. So all the benefits from globalization have run their course.
As the world starts to revert to a home-country bias, there is more pressure to satisfy our energy needs with domestic production and to grow our own food.
TheStreet.com: So what are the three stocks?
Ablin: Chevron (CVX) - Get Free Report, Archer-Daniels-Midland (ADM) - Get Free Report, and McCormick (MKC) - Get Free Report. All have generous dividends, and more importantly, the dividends are growing. They all have high-quality balance sheets too and are trading at a reasonable discount to the market.
TheStreet.com: What kind of bonds do you favor now?
Ablin: We like high-quality bonds, as I mentioned. High-yield corporate bonds don’t adequately reflect the risk of recession. We don’t like to be vulnerable to an economic downturn.
TheStreet.com: Do alternative investments provide something of value to the average investor?
Ablin: They do provide diversification. The most important thing is matching investments with your time horizon. I wouldn’t invest a dollar in the stock market unless I had a seven-year time horizon.
Generally investors get in trouble when they mix up their time horizons. For shorter-term goals, your money should be in fixed income.
If you have to make a tax payment next April, I don’t care how much I like Apple, I’m not going to put money in it, because the return is random over a short period. But for retirement you should be oriented toward stocks.
