Investment Outlook for 2008: Continued Growth Ahead

Posted January 7, 2008

"Whenever we see pullbacks in the U.S., we see it as opportunities to go in and pick value…" – Horacio Marquez

Baltimore – (TFN): The following was taken from Horacio Marquez’s appearance on TFN Smart Trading Action Alert with Laura Cadden. (Watch the financial video.)

Laura Cadden: Over the past decade the world economy has been expanding faster and more dramatically than ever before. This transformation has triggered the most powerful creation of wealth the world has ever witnessed, especially in Asia, but more recently more and more economists have been calling for a dramatic trend reversal citing public and private debt levels as well as trade and balances. Now, global economic growth is affected by synchronized events occurring in the major economies despite the worldwide fallout of the U.S. subprime loan crisis and the record commodity and energy prices.

The U.S., EU, Japan and China have been experiencing strong growth. I’ve invited Horatio Marquez, investment director of The Money Map Report, to give us a sneak peak at what really lies ahead for the global economy and what sectors to focus on as traders and investors.

Welcome to the show, Horatio.

Horatio Marquez: Thank you very much, Laura. I’m delighted to be here.

Laura Cadden: Current economic strength would be a very strong argument against a global slowdown or indeed a recession. Why do you think the current outlook of economists, and especially newsletter editors, has been so bearish of late?

Tired of reading? Watch the financial video….

Horatio Marquez: Well there’s a little bit of exaggeration in the current trends. Obviously, there is a crisis in the U.S. originated by sub-prime mortgages that has translated into more volatility and basically locked up certain parts of the current markets creating a credit crunch, but we’ve seen these crises in the past around the world and the capacity of both the administration and central banks to deal with this crisis and resolve it, especially in an economy as flexible and developed as the U.S., leaves me with very little doubt that we’ll basically come out of this situation very, very well and quite quickly.

Laura Cadden: What do you think are the key factors to continued economic growth?

Horatio Marquez: Well basically to start with, the U.S. is a very flexible and open economy and basically we’ve seen the dollar sell off. The dollar sell-off is equivalent to a monetary easing and that is very stimulative of the economy as exports start increasing dramatically and imports contract creating a lot of economic activity domestically. At the same time, with a weak dollar it attracts a massive amount of capital from abroad as the U.S. being a very large economy becomes very attractive for the rest of the world to invest in, and that again is very stimulative.

Thirdly, the Fed continues to drop interest rates. That again is very stimulative of economic activity and those three are very powerful reasons why the U.S. will go through a very mild deceleration and reacceleration in the second half of next year. To add some fuel to this fire, next year is a presidential election year, which traditionally has been very stimulative of both the economy and the stock market.

Laura Cadden: So in other words, the recent volatility of the markets also creates an opportunity, doesn’t it, for investors?

Horatio Marquez: That’s exactly right. In fact, I was just chatting with some other of my colleagues in the editing profession where we were seeing this volatility in the U.S. as an incredible buying opportunity. So whenever we see pullbacks in the U.S. we see it as opportunities to go in and pick value, pick basically the proverbial baby that has been thrown out with the bathwater.

Laura Cadden: So tell me about what risk factors you feel could derail this kind of bullish outlook.

Horatio Marquez: Basically, the major risk over here is that you have some sort of blowup that goes out of control. For example, I’d say the major blowup would be a deflationary spiral like Japan fell into and it cost them 10 years of growth and major asset deflation, but the advantage that we have is number one, we’ve seen what happened in Japan, number two, the Fed is ahead of the curve in controlling and in being very alert at preventing that deflationary spiral. Therefore, it is my strong belief that the Fed will continue easing rates to prevent the U.S. from falling into that deflationary spiral that’s so damaging to the banking system.

Laura Cadden: So where are you recommending your readers to look right now?

Horatio Marquez: Well basically, I’m favoring those benchmark financial institutions like Citicorp where already the wheels have started to turn in order to recapitalize and resolve the problems and make them once more lean and mean profitable moneymaking machines.

Other areas of interest for me in the U.S. would be multi-national companies that invest in the global scenario and have competitive advantages… companies like Coca Cola, Pepsi, exporters like Boeing, 3M, and U.S. industrials, as well. A weak dollar favors U.S. industrials and obviously the areas of growth around the world. China, Brazil, and Russia I’m not that interested because of the political situation amassing too much power. It’s not to my liking.

India is going to accelerate their banking industry so it looks like a tremendous opportunity. And in China I’m expecting some slowdown because already the Chinese are overheating their economy and they’re seeing some signs of inflation. The second wave of profits that I’ll see in China are not so much the companies that export into the U.S. but companies that grow domestically because of the mammoth growth and purchasing power that the Chinese are experiencing and are going to continue to experience over the next 5-10 years.

To learn more about Horacio Marquez, and his service, The Money Map Report, go to www.moneymorning.com.

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