NEW YORK, April 22, 2015 /PRNewswire/ -- According to market watcher Isaac R. Souede, Chairman and Chief Investment Strategist of Legg Mason affiliate Permal Group, in his Second Quarter Outlook the greatest tailwind driving global economic growth continues to be central bank stimulus. At the same time, markets are facing a headwind of uncertainty, which is leading to increased volatility.
Together, he and the Permal team project that U.S. economic numbers for Q1 2015 figure to be impacted by nationwide poor weather, but second quarter performance should be much stronger.
"The greatest tailwind behind market action has been, and will continue to be, central bank stimulus," Mr. Souede wrote in a global market review. "With monetary easing across the world – excluding the U.S. and UK – in Europe, Japan and China, and no immediate change on the horizon until economies really do improve, this tailwind should continue."
At the same time, Mr. Souede cautioned, "There are also significant headwinds to be aware of. One is uncertainty, which leads to volatility, and this is increasing across the spectrum."
This will create opportunities for investors who are willing to look beyond passive strategies.
"Active investors are well placed to take advantage of any uncertainty and there are plenty of opportunities," he observed. "In such an environment, long/short equities and fixed income are particularly well suited to these types of volatile, punishing markets, with rewards if you are right on the long and the short sides."
Permal also offers short videos of Mr. Souede discussing the outlook for Q2, energy prices, investment strategies, the U.S. economy, interest rates and U.S. dollar strength, equity markets, China, Japan, emerging markets and Europe. Those videos can be accessed via the Permal web site
To Mr. Souede, investment opportunities are rife in several sectors and geographies.
"Across the globe, particular ideas include share buybacks in the U.S. as we move towards a rate rise," he wrote, projecting that, "The money is on a September U.S. interest rate increase." He continued, "Likewise share buybacks in Japan, particularly as corporations are sitting on $2.4 trillion in cash. And equities in Europe, as quantitative easing and oil prices have given the markets a big tailwind."
The mix of quantitative easing and cheap oil has resulted in tangible improvements in several areas, including regional data in Europe.
"In Japan, it has stimulated the economy; and in China it has helped GDP at a time where Chinese GDP has been slowing at around one percent a year," Mr. Souede wrote. However, in his view, "These benefits will dissipate over time, but if we have not returned to $75 oil in 12 months' time I will be concerned about global growth."
Mr. Souede also cautioned, "In the emerging markets you need to be tactical, for this is a trading market that is very different from the rest of the world."
"Energy has also created several new themes, with massive pricing dislocations in the sector," he wrote. "There was a good opportunity in fixed income, which has already largely played out. Going forward the more attractive area, if you believe prices will drift back up, will be equities that have suffered, regardless of fundamentals, with clear winners and losers."
In these uncertain markets, Mr. Souede and the Permal team believe savvy investors can benefit.
"Today, with more patience and a longer-term time horizon, investors should be able to generate significant returns with relatively little risk."
About Isaac R. Souede
Isaac R. Souede is Chairman and Chief Investment Strategist for the Permal Group. He is also Director of Permal (PGI) LLC, a role he has held since April 1987. He was previously Chief Executive of the Group, and was appointed Chairman, Chief Executive Officer and Director of Permal Asset Management LLC in April 2003, and Director of Permal Group Ltd. in July 2005. Mr. Souede serves as a director of the Steinhardt Fund as well as other funds within the Permal Family of Funds. He holds an M.B.A. from the University of Michigan (1977) and a B.S. from the State University of New York at Stony Brook (1974). Mr. Souede was a licensed Certified Public Accountant in the State of New York.
About Permal Group
Permal Group is a leading global alternative asset manager offering investment solutions through established funds and customized portfolios. Today, Permal manages approximately $22 billion with a global investment team based in New York and London, and additional investment resources in Singapore and Paris. Clients include sovereign wealth funds, pension funds, endowments, foundations, insurance companies, family offices, private banks and high net worth individuals. Permal has established offices in Europe, America and Asia, and has extensive networks of experienced managers and relationships around the globe. To find out more, please visit www.permal.com.
About Legg Mason
Legg Mason is a global asset management firm with $703 billion in assets under management as of March 31, 2014. The Company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, Maryland, and its common stock is listed on the New York Stock Exchange (symbol: LM).
These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. All data referenced are from sources deemed to be reliable but cannot be guaranteed. Securities and sectors referenced should not be construed as a solicitation or recommendation or be used as the sole basis for any investment decision.
Equity securities are subject to price fluctuation and possible loss of principal. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses and have a potentially large impact on performance.
Short selling is a speculative strategy. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.
Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls.
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