Alexander Altmann, Managing Director – Americas Head of Equity Trading Strategy, at Citi, joins The Sherman Show to discuss among other subjects his sanguine take on Federal Reserve plans to raise rates but his cautionary view on the risks surrounding Fed balance sheet shrinkage (4:52); the Fed’s policy dilemma in addressing inflation without tanking “America’s ATM,” the S&P 500 (13:50); the advantage of debt leverage to corporations in an inflationary regime (21:16); and valuation multiples rather than earnings as the larger risk to U.S. stocks, particularly growth stocks (26:41). The podcast hosted by Jeffrey Sherman and Samuel Lau was recorded on Feb. 15, 2022.
In terms of equity allocation, Mr. Altmann notes that while the protracted outperformance of U.S. stocks relative to European stocks might have conditioned some to believe in open-ended American exceptionalism, leadership historically has alternated between those two markets, with the last period of “non-U.S. exceptionalism” occurring in 2000-2008 (34:19). Pointing to Citi research showing that U.S. equities represent close to 60% of the MSCI World index but 48-49% of corporate profits, he offers the hypothesis that some of the capitalization of the U.S. stock market might become redistributed to other parts of the world. Within U.S. stocks, Mr. Altmann believes sector selection will play an increasingly important role in investment performance and makes his case for producers of commodities.
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