Lower Volatility in 2010 Will Tempt Investors to Deviate from Long-Term Strategies, Virtus Chief Market Strategist Joe Terranova
January 27 2010 - 4:46PM
PR Newswire (US)
HARTFORD, Conn., Jan. 27 /PRNewswire-FirstCall/ -- The pace of the
capital markets recovery will begin to moderate in 2010. The Fed
will pull the plug on handouts to the private sector and remove
some liquidity. There will be pressure on Treasuries, a shift from
a cyclical recovery to a quality recovery, and opportunities in the
corporate bond market. It's all a question of when, says Joe
Terranova, chief market strategist for Virtus Investment Partners
in his latest commentary, It's the Tortoise, Not the Hare in 2010.
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It's a waiting game that will test investor patience throughout the
year. "The comfort assets of 2009 will be favored once again in
2010; the difficulty for investors will be in maintaining the
discipline to adhere to their initial investment strategy. Low
volatility markets can be incredibly dangerous as they continually
tempt investors to change course." However, as he did throughout
2009, Terranova encourages investors to continue leveraging
opportunities to deploy capital into the markets. Terranova
believes the Fed will move steadily throughout the year to unwind
its "bloated" balance sheet. Federal Reserve Chairman Ben Bernanke
is waging a war against deflation, and will need to see at least
three positive signs - sequential improvement in unemployment, a
rebound in housing prices, and growth in the domestic economy that
is above expectations - before the Fed makes any significant change
in policy. As the government starts to issue more long-term debt,
it will be harder for the Fed to control the longer end of the
10-year Treasury yield curve. That will create a downtrend in the
10-year Treasury yield, Terranova says. "Remember that corporate
bonds do very well in a low volatility market," Terranova says. "If
you're not going to stay in Treasuries, corporate bonds may be a
good place to park investment dollars this year." On the earnings
front, Terranova suggests that "earnings exuberance exhaustion" may
get the best of investors by the start of the second quarter, as
the recovery in the capital markets early this year illustrates,
perhaps prematurely, an independently healthy private sector.
Terranova, who has specialized in the energy and natural resources
space, sees natural gas as a "sleeper" investment pick of 2010. He
notes that Exxon Mobil's recent decision to purchase XTO Energy,
one of the nation's largest gas producers, is telling. "By doing
this deal, the biggest company in the world is telling us that
natural gas will replace coal as the second largest source of
energy, domestically." This deal will help re-draft energy policy
in Washington and "will elevate the position of natural gas in
future energy policy like never before." About Virtus Investment
Partners, Inc. Virtus Investment Partners (NASDAQ:VRTS) is a
distinctive partnership of boutique investment managers singularly
committed to the long-term success of individual and institutional
investors. The company provides investment management products and
services through its affiliated managers and select subadvisers,
each with a distinct investment style, autonomous investment
process and individual brand. Virtus Investment Partners offers
access to a variety of investment styles across multiple
disciplines to meet a wide array of investor needs. Additional
information can be found at http://www.virtus.com/.
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http://photoarchive.ap.org/ DATASOURCE: Virtus Investment Partners
CONTACT: Matthew Kirdahy, , or Andrew Healy, , both at
+1-212-812-5665, both of Middleberg Communications; or Joe Fazzino
of Virtus Investment Partners, +1-860-263-4725, Web Site:
http://www.virtus.com/
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