Senior managing director and deputy head of investments
Putnam Investments, Boston
Assets under management: $310 billion
S&P 500: 1300 to 1350
NASDAQ: 2200 to 2300
10-year Treasuries: 5.5%
Two-year Treasuries: 4.25%
Money market rates: 3%
Hot sectors: pharmaceuticals and financials
High-yield bonds are the place to be in 2002.
With the economy still in recession and stocks headed for modest gains once the economy picks up steam, high-yield bonds are poised to outperform equities this year, said Stephen Oristaglio. The current environment is similar to the 1991-'92 recession, he said. When the recovery got under way then, high-yield bonds took off, returning nearly 40%. Things might not be that good this time, but he expects returns in the 14% to 25% range.
"2002 is the year of high-yield bonds. Just as people gave up on value stocks in 1998 and turned to growth stocks in 1999 ... we think high yield is the place to be."
Mr. Oristaglio said he is "bullish" for domestic equities this year but doesn't look for the double-digit returns of the past decade. Stocks should do well in the first half as the economy picks up strength.
"We think it's going to be a period that favors bottom-up stock picking rather than sectors," he said.