(Bloomberg) — SkyBridge Capital, manager of about $12.1 billion in assets, bets U.S. stocks will rise as much as 10 percent next year as lagging growth in Europe and emerging markets deter investors.
S&P is still the king, Troy Gayeski, a partner and senior portfolio manager at the New York-based money manager, said by phone on Dec. 11. The U.S. is the brightest spot in the global economy.
The S&P 500 Index of equities has advanced 8.3 percent in 2014, poised for a third year of gains, compared with a 7.1 percent decline in the MSCI Emerging Markets Index as of 2:40 p.m. in Istanbul. The Bloomberg Dollar Spot Index, which tracks the U.S. currency against those of 10 trading partners, rose 9.7 percent this year, the most in the gauges nine-year history. That rally isnt over yet, Gayeski said.
Robust U.S. market performance comes as the worlds biggest economy grew 3.9 percent in the third quarter, poised for a 2.3 percent expansion in 2014, according to a Bloomberg survey. In contrast, the euro areas economy may expand 0.8 percent this year, while the average 2014 growth estimate for 15 emerging economies in Europe and Africa is 1.7 percent, Bloomberg surveys show.
Europes been on a decline for a long time, and we dont see any change in that, Gayeski said. Before the crisis, it was a 2 percent economy. Now its a 75-basis-points economy. With the U.S. Federal Reserve expected to increase interest rates for the first time since 2006 next year, a meaningful investment in emerging markets doesnt make sense, Gayeski said. For them will be another year of underperformance.
Interest Rate
Gayeski in February told Bloomberg it was just too early to invest in emerging markets. You have to wait for the cycle to play out.
The Fed may increase its benchmark rate to 0.40 percent from near zero in the second quarter of 2015, according to a Bloomberg survey of about 80 analysts. That would cause European and emerging markets assets to suffer disproportionately, Gayeski said.
A tighter U.S. monetary policy would damp demand for higher-yielding assets, and is weighing on emerging markets, London-based Nicholas Spiro, managing director of Spiro Sovereign Strategy, said last month.
The SkyBridge Multi-Adviser Hedge Fund Portfolios LLC – Series G is up 2.71 percent as of the end of October, headed for its third consecutive year of gains.
Oil Plunges
This years slump in oil prices is a further boon to U.S. consumer stocks, Gayeski said. West Texas Intermediate crude has slumped 41 percent this year to $57.74. Besides, India, Japan and Turkey will be the big winners, while Venezuela, Russia and Iran will be the biggest losers from the slump, he said.
This is like the last nail on the coffin for those who thought the commodity supercycle could get restarted, Gayeski said. As inflationary pressures recede and investors digest slower growth elsewhere, money has been flowing to the U.S.
To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net Srinivasan Sivabalan
