Dave Nicoski is optimistically predisposed to the health of the economy as stocks, the US dollar, interest rates, and oil rise together. He correlates this phenomenon to a “post-World War 2” era when “markets reversed and broke out to new highs right around the '45-46 period.”
“You had a time out and then a further advance which started a secular bull run.” He bestows his confidence on the new administration, who are “advocates of corporations” and, contrary to the past 30 years, would vie to “keep jobs within in the country”.
He also feels that the current investment environment and Republican plan for fiscal policy changes set up a precedent for continued M&A, which should add to the bottom line of multinational corporations. He suggests that it is an opportune time “to get into names that you’d already don’t own.”
“I think infrastructure names are going to do quite well for quite some period of time,” Nicoski said.
Bond Market Posing Risk
On risk, Dave says the US economy is “truly into a bond bubble,” with “1.7 trillion dollars wiped out of the market” since elections. Equities probably have “advanced to a level in many of those areas in terms of when the rubber meets the road on infrastructure spending,” setting up opportunities for pullbacks in those areas.
He remains wary of “energy advancing significantly in a short period of time,” but does not feel that Federal Reserve would prioritize curbing inflationary pressures in a strong dollar environment. Rather, normalization of interest rates would be a “welcome sight.”
He reiterates, “we are almost as overbought as we have seen in nearly 20 years in the bond market,” and rate hikes would be non-conducive. On bond price volatility, he feels a 2.2% long-term Treasury yields are a “safe area,” but emphasizes the need to “rotate out of bonds” into equities at a sustainable level so as to not to “burst this bond market bubble that has been brewing.”
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