If investors move away from bonds and increase their equity exposure, the impact on stock valuations will be considerable.
(Vocus/PRWEB) February 07, 2011
Fred Alger Management, Inc. (Alger) has released its Winter 2010 Commentary at http://www.alger.com. In this latest commentary, Alger, a well-known pioneer of growth equity investing, suggests that equity markets could gain as much as 20% in 2011.
In the commentary, Alger Chief Executive Officer Dan Chung acknowledges that a slumping real estate market and high unemployment continue to challenge the country’s economic recovery. Nevertheless, he believes a variety of broad themes will continue to propel equity prices upward, even as markets continue to exhibit considerable volatility. These themes include strong corporate earnings, an improving outlook for the economy and improved sentiment among U.S. consumers, businesses, and investors.
Mr. Chung goes on to note that strong equity gains in 2010 helped offset the impact of declining real estate values on Americans’ wealth, contributing to improvements in consumer spending during the fourth quarter. He notes that additional signs of economic expansion surfaced, including increasing output from utilities in November, declining credit card delinquencies, and two upward revisions to third quarter gross domestic product.
Going forward, Mr. Chung believes that the job front appears ready to improve, citing a Business Roundtable report that 55% of CEOs recently interviewed, plan to hire workers during the first six months of this year. The organization also reports that 59% of CEOs expect to increase capital spending during the same time period.
Mr. Chung comments that a multi-year trend of retail investors redeeming equity fund shares and flocking to bond portfolios appears ready to reverse. He cites fourth quarter statistics that point to investors becoming increasingly aware of the risks associated with bond portfolios as fixed income markets exhibited considerable volatility. In comparison, 2010 was the second year of strong returns for equity markets, highlighting the strong potential returns of stocks. If retail investors move away from bonds and increase their equity exposure, the impact on stock valuations could be considerable as fixed-income mutual funds currently have more than $3 trillion in assets.
Chung also expects cash rich corporations to continue conducting stock buybacks and to increase dividend payments, which will further support equity valuations.
The Alger Winter 2010 Commentary can be found in its entirety at http://www.alger.com.
Fred Alger Management, Inc. was founded in 1964 and currently manages more than $16 billion. Alger's investment philosophy is focused on discovering companies undergoing Positive Dynamic Change, which we believe offer the best investment opportunities. Alger investment strategies are available to institutional investors through separate accounts and mutual funds and to retail investors through Alger mutual funds. Fred Alger & Company, Incorporated, a broker-dealer and the parent company of Fred Alger Management, Inc. offers mutual funds as well as institutional funds for defined benefit and defined contribution plans. For more information, please visit http://www.alger.com.
Investing in the stock market involves gains and losses and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as the prices of growth stocks tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political and economic developments. The Business Roundtable is an organization of chief executive officers of leading companies.
Before investing, carefully consider the Fund’s investment objective, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information about the Fund, call (800) 992-3863, visit http://www.alger.com, or consult your financial advisor. Read the prospectus carefully before investing.
Distributor: Fred Alger & Company, Incorporated, Member NYSE Euronext, SIPC.
NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE.
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