Whether or not the US plunges into recession is irrelevant for investors as poorly performing stocks are already trading at negative growth levels, Legg Mason chief Bill Miller says.
Miller, the Legg Mason Capital Management chairman and CIO, believes equity valuations are compelling in the areas hit hardest over the past few years and long-term investors should be well rewarded by opportunities in the current stock market.
“Investors seem to be obsessed just now over the question of whether we will go into recession or not, a particularly pointless inquiry,” Miller says.
“The stocks that perform poorly entering a recession are already trading at recession levels.
“All of the poorest performing parts of the market, housing, financials, and the consumer sector – with the exception of consumer staples – are at valuation levels last seen in late 1990 and early 1991, an exceptionally propitious time to have bought them.”
Miller is confident the Federal Reserve interest rate cuts and the White House fiscal stimulus package will help revive the US economy.
“If these measures aren’t enough to free up credit and stimulate spending sufficient to set the economy on a growth path, then additional measures will be taken until that is accomplished.
"This does not mean that the recovery will be swift, or seamless, or without additional trauma. But there will be a recovery, and I think the market abounds with good value.
“Those values may get even better if the markets get more gloomy, but they are good enough now for us to be fully invested."
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