Portfolio Manager Perspectives

Jeff Benjamin

ING's Uri Landesman: predicts unemployment will peak by February

Nov 12, 2009 @ 10:54 am

By Jeff Benjamin

Investors should be careful not to let the “sticker shock” of the latest unemployment data derail them from their long-term investment strategies, said Uri Landesman, head of global growth at ING Investment Management Americas.

“I would not be changing a longer-term asset allocation strategy based on anything we've seen in the last two years,” said Mr. Landesman, who manages $1.7 billion worth of pension account assets.

While acknowledging that the latest data showing a 10.2% national unemployment rate was above his 9.9% forecasted rate for 2010, he believes unemployment is nearing a peak.

“My gut is telling me the peak in unemployment is coming soon, and I'd get nervous if it didn't peak by February,” he added.

What happens from there, however, will depend largely on whether the banks start lending money again, he said.

“The banks are afraid that the economy right now is primarily being driven by government stimulus,” he said. “And it is a dangerous call, because we won't know until the government stops liquidating the financial markets if the economy can grow on its own.”

Based on the bullish manner with which the stock market has responded over the past few days to last week's report showing the highest unemployment rate in 23 years, Mr. Landesman said there is a case for being “reasonably sanguine” about the stock market.

“I could see the stock market rallying another 5% this year,” he said.

However, he explained, such a move will require continued support from the business sector and a step-up in support from consumers.

According to an ING proprietary model that measures 14 economic indicators, the seven indicators related to business activity are all positive, while the seven indicators related to the consumer remain negative.

“It's pretty clear that businesses are leading the recovery,” he said. “Consumers are not likely to get on board until they start to see unemployment going down.”


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