Chief investment officer
UBS Asset Management, Chicago
Assets under management: $385 billion
GDP: 1% to 2%
CPI: 2% to 2.5%
Fixed-income total return: 4% to 5%
S&P 500: 1125 to 1175
NASDAQ: 1875 to 1925
Hot fixed-income sector: AAA-rated commercial mortgage-backed securities
Hot stock sectors: Drugs, financials
Hot stocks: Citigroup, Cephalon, Masco and Nextel
The phrase "cautiously optimistic" often is doublespeak for "I don't know," but in Jeffrey Diermeier's case, the description fits perfectly.
He noted the Sept. 11 terrorist attacks only sharpened the effect of a U.S. recession that began in March, caused by deteriorating economic fundamentals.
But Mr. Diermeier's outlook is not too pessimistic. He noted recessions tend to be shorter than most market expansions-between six and 18 months-meaning the U.S. slowdown is already 10 months old.
Thus, he predicts the U.S. economy should see some recovery by the middle of 2002, albeit weaker than consensus expectations. The key driver, he said, will be investment spending.
As far as the stock markets go, Mr. Diermeier said analysts at Brinson still believe the U.S. equity market is about 15% overvalued and the Nasdaq, slightly more than that.
To reach his predicted 4% to 5% return on fixed income, Brinson will take a slightly long duration position because, "while rates are probably near a bottom, the increased turbulence in the market is creating selective pockets of opportunity along the yield curve," Mr. Diermeier said. In global fixed-income portfolios, Brinson is slightly underweight relative to benchmarks in non-U.S. holdings. "We favor the U.S. market and have a modest exposure to Treasury inflation-protected securities. We also have overweight positions in emerging market debt and have a favorable outlook on high-yield bonds."