On Wednesday, Sean and I drove to Baltimore to attend the 2011 Investment Outlook hosted by Charles Schwab. The all-day conference consisted of probably something like 75 to 100 other investment advisors, and the agenda consisted of some interesting and timely topics. Most of the investment experts that they brought in as presenters were very good, and included people like Richard Bernstein (formerly with Merrill Lynch, now with Eaton Vance) and Bill Miller of Legg Mason.
While there was a healthy dose of disagreement at times from the various panelists, the general mood seemed to be fairly positive. We noticed that several speakers thought the U.S. economy was picking up and if anything would likely surprise to the upside this year. As a result, a common theme seemed to be that U.S. equities are poised to outperform their international counterparts in 2011, and in particular relative to emerging markets. That would certainly be a “surprise” to most investors based on mutual fund flows that have heavily favored emerging markets equity funds over domestic equity funds in the past few years.
Another area where there seemed to be some agreement was in regards to the municipal bond market. Several speakers took issue with recent fears of imminent bankruptcies and defaults at the state and local level, claiming that many states are well on their way to addressing budget problems and that in fact there is now an attractive opportunity in munis due to the degree of recent selling. As clients or regular readers probably know, we have been building a tactical position in municipal bonds in recent weeks in some of our portfolios. While we acknowledge there are certainly problems and reasons to be concerned, the indiscriminate selling by municipal bond holders seems excessive to us.
Overall, we both thought it was a day well spent, and we came back with a few specific investment ideas that will be explored in the coming weeks.
