The forecast for personal finance in 2011 is partly cloudy for U.S. consumers but sunny for stock investors, said analysts on Dec. 8 at a Thomson Reuters panel talk.
Individual investors may still be feeling risk-averse after the 2008 crisis, but they should consider getting back into U.S. stocks, panelists agreed during a discussion that ranged from inflation to the housing market to retirement savings.
“The highest quality companies in the world are right here in the United States,” said Bill Miller, chairman and chief investment officer for Legg Mason Capital Management.
U.S. equities are currently undervalued by 20% to 30%, and market conditions for individual investors are considerably better now than they were a couple of years ago, said Miller, a noted value investor.
Miller’s top stock picks for 2011 are in technology, healthcare and financials. He likes Hewlett-Packard, Cisco, Microsoft and IBM in the tech sector, and believes that large-cap financials such as Citigroup and JPMorgan are undervalued.
But the reality is that uncertain investors are continuing to shy away from stocks, even as cash-rich U.S. companies are seeing higher dividend growth. Instead, they are sticking to low-yielding bonds because they still see them as a safe harbor.
“If the individual investor has shown a talent for anything, it’s chasing past performance,” warned panelist Liz Ann Sonders, chief investment strategist for Charles Schwab & Co., adding that she has only recently started to see some investors looking to get out of bonds.
Sonders recommended investing in consumer-sector companies with sales in the BRIC countries of Brazil, Russia, India and China, which are seeing tremendous growth among the middle classes.