Kevin Mahn: Despite strong rally, the specter of unemployment keeps investors on the sidelines

Despite the 60% stock market rally since the March low, many consumers remain fixated on the immediate reality of unemployment, and that is preventing a lot of investors from participating in the rally, according to Kevin Mahn, chief investment officer with Hennion & Walsh Asset Management Inc.
OCT 25, 2009
Despite the 60% stock market rally since the March low, many consumers remain fixated on the immediate reality of unemployment, and that is preventing a lot of investors from participating in the rally, according to Kevin Mahn, chief investment officer with Hennion & Walsh Asset Management Inc. Not only are a lot of investors missing the rally by sitting in cash — there is $3.5 trillion currently earning almost nothing in money market funds — but the reluctance to spend money could stall the economic recovery, added Mr. Mahn, whose firm manages $2 billion. “High levels of unemployment and concerns over future employment will keep consumers from spending to the levels necessary to develop a sustainable economic recovery,” he said. “In an economy where over 70% of GDP comes from consumer spending, high levels of unemployment over an extended period of time presents a considerable hurdle for an economy that is desperately trying to find its legs again.” Mr. Mahn's expectation of growth in the fourth quarter is reflected in his allocation to exchange-traded funds that focus specifically on consumer goods and technology.
“We also have long allocations to an ETF that tracks silver. We feel comfortable with this allocation as silver has similar inflation protection capabilities as are found with gold, while also having more industrial uses than gold,” he said. The iShares Silver Trust ETF (SLV) has gained more than 36% since the March 9 market low and is up more than 55% from the start of the year. Gold, as tracked by the SPDR Gold Shares ETF (GLD), is up 15% from the March low and up more than 20% for the year. The S&P 500, by comparison, is up more than 62% from the March low and up more than 21% for the year. Mr. Mahn is hedging some of his long commodity exposure by shorting some areas — such as consumer services and domestic large-cap. “If third-quarter earnings disappoint and there is a pullback in the equity markets, large-cap stocks, which have run up considerably since the March 9 bottom, and consumer services-oriented companies that have a difficult holiday season staring them in the face, are likely to be most affected,” he said. “I am certainly cautiously optimistic in the short term, but more optimistic over the longer term, recognizing the days of volatility and uncertainty are not behind us,” Mr. Mahn said. “And we, as portfolio managers, will have to be creative in finding attractive risk-adjusted-return potential throughout the world in the months ahead.”

Latest News

Farther debuts AI investment proposal tool for advisors to win clients
Farther debuts AI investment proposal tool for advisors to win clients

"Im glad to see that from a regulatory perspective, we're going to get the ability to show we're responsible [...] we'll have a little bit more freedom to innovate," Farther co-founder Brad Genser told InvestmentNews.

Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler
Barred ex-Merrill Lynch advisor arrested in alleged $2.6M theft of former Miami Dolphin Pro Bowler

Former advisor Isaiah Williams allegedly used the stolen funds from ex-Dolphins defensive safety Reshad Jones for numerous personal expenses, according to police and court records.

Are you optimally efficient?
Are you optimally efficient?

Taking a systematic approach to three key practice areas can help advisors gain confidence, get back time, and increase their opportunities.

Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida
Advisor moves: Father-son duo leaves Raymond James for LPL, RayJay adds Merrill Lynch alum in Florida

Meanwhile, Osaic lures a high-net-worth advisor from Commonwealth in the Pacific Northwest.

Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B
Beacon Pointe adds six RIAs in two-month acquisition spree, boosting AUM by $2.7B

The deals, which include its first stake in Ohio, push the national women-led firm up to $47 billion in assets.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.