By John P. Calamos Sr.
The year 2009 was strong for the financial markets, and investors may be wondering if a repeat is likely in 2010. No one can answer this categorically, but it may help to remember the old stock market adage that says: “every bull market climbs a wall of worry.” Thus, 2010 may be a challenging year, amid valid concerns about credit, employment, the pace of recovery and lingering volatility in financial markets; however, we believe there should also continue to be many investment opportunities. We foresee strong opportunity abroad, and investors willing to broaden their investment horizons from the U.S. market to a more global focus should benefit. Oftentimes the biggest obstacle for wealth creation is not market action but investor inaction. Looking back, at the dawn of 2009, many investors remained on the sidelines waiting for the foggy investment outlook to clear up, while later in the year they waited again for an impending market correction that did not materialize. However, as these investors waited, the seeds of worry planted in 2008 bloomed into hefty returns, particularly among growth stocks, convertible bonds, high yield bonds and non-U.S. equities, all of which outperformed the broad U.S. equity market.
From a risk management perspective, we strongly believe that investment strategies should focus on longer-term trends and on selecting companies potentially best positioned to benefit from these trends. This approach has worked well for us over many years and last year was not the exception. One such trend has been the global increase in regulations and economic policy, which stand to have lasting effects on the financial markets, and which we continue to monitor closely. The good news is that financial markets can exert pressure on government policy. By moving assets with relative ease across borders, markets have in a sense a vote on those policies and as a result opportunities may shift quickly. We believe that the global economy is experiencing very uneven growth and that a rising tide may not raise all boats as it did over the past few years. This partly explains our belief that investors should now, more than ever, maintain a global focus while selectively choosing sectors, industries, and companies in which to invest. The global landscape is in constant flux and cross-border investing requires constant monitoring.
As Greek-Americans we hope and yearn for a prosperous Greece. Unfortunately, the realization that Greece’s budget deficit for 2009 could potentially be near 13% of the country’s gross domestic product sent global shocks toward the end of the year, leading to downgrades of Greece’s creditworthiness. As a result, Greek stocks and bonds sold off, and the yields on government bonds increased to compensate for the additional risk taken by holders of Greece’s public debt. It is not just the decrease in bond prices that is raising fears among international investors, who could always come back. It is the erosion of creditability in the Greek government that could worsen the situation near term and create more lasting problems. Unless investors can be persuaded that stability in public finances is achievable, Greece may cease to be, at least for a while, the magnet of foreign capital that it once was.
Here in the United States, the weak dollar reflects similar concerns of increasing debt levels. Whether it is a weakening U.S. dollar or Greek bonds selling off, investors searching for the best opportunities can always respond to government policy by moving funds around the world. Remember “it is not a stock market but a market of stocks,” and we believe that stock selection shall remain a key differentiator of future returns in this uneven global growth environment.
John P. Calamos, Sr. is CEO/Co-CIO of Calamos Investments www.calamos.com.
For questions or comments please write to JPCsr@calamos.com, or call 888.857.7604.
The opinions referenced are as of December 2009 and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.
An Investor’s Perspective
