OppenheimerFunds Inc. sees the markets' short-term focus as creating profitable investment opportunities for those willing to take a long-term view, and it sees four drivers of investment returns next year.
The New York fund company said Monday that changes in the behavior of leading market participants and structural changes in the stock and bond markets have produced an extreme focus on short-term investment strategies and results.
The growth of hedge funds, the instantaneous global flow of information, and investors' search for unattainable safe returns have created this short-term investment environment, the company said, and this has produced very efficient pricing of short-term risks, which eliminates most profitable near-term trading and arbitrage opportunities.
"Over time, we anticipate that these anomalies will be reversed and that the investors who are willing to patiently measure results over years rather than over quarters or weeks will be rewarded," Kurt Wolfgruber, OppenheimerFunds' chief investment officer, said in a press release.
OppenheimerFunds investment experts identified corporate spending, an approaching end to the Fed's rate-tightening campaign, a slowing housing market, and foreign investment in U.S. equities as investment themes for 2006 and beyond.
U.S. corporations continue to hold record levels of cash on their balance sheets, and the global economy should prosper as businesses deploy this cash even if consumers cut back.
Global competition, technological advances, and corporate efficiency are keeping inflation benign, so "we may be approaching ... the end of the Fed's tightening cycle," said Jerry Webman, OppenheimerFunds' director of fixed income.
After a historic climb in real estate prices, including a 15% price rise in 2005, the housing market appears to be cooling down. "It is our expectation that equities will outperform real estate investments for the first time in five years," said Bill Wilby, the company's director of equities.
And with interest rates in the U.S. likely to top out at modest levels and equities trading at reasonable valuations, net foreign demand for U.S. equities, which has trended up in recent months, might begin to trump that for U.S. fixed income instruments.
