Thursday, May 17, 2012

Stocks poised for long-term growth, CEO says

The CEO of financial services firm Janney Montgomery Scott is bullish on U.S. stocks, despite the volatility that's likely in the coming months, he told the Observer this week.

"I believe for the long haul, U.S. equities are the place to be," said Tim Scheve, who was visiting the Philadelphia company's SouthPark office. "... We just need to get through the short-term macro issues."

So far this year, he said, the global economy is looking a lot like 2011 -- which looked like 2010. Trouble in Europe continues to drive market swings, and unrest is likely to continue into the fall as U.S. voters gear up for the presidential election, Scheve said.

But once that uncertainty is removed, stock markets should stabilize, he said. Long term, the U.S. is positioned for growth: Young people are graduating college and entering the workforce, companies' balance sheets are stronger and economic indicators are improving, he said.

The CEO also weighed in on his business, tips for investors and what's in store for big banks:

On the need for financial advice: Baby boomers are the first generation to really have to fund their retirement, given their longer life expectancies and their decreasing reliance on pensions and Social Security. And the recession has made them more skittish than ever. "The need for advice now is greater than it's ever been," Scheve said.

On Facebook: He doesn't recommend jumping in: "Like most tech IPOs, it's very, very hard to value," he said. It remains to be seen whether Facebook will be as successful as Google and Apple. Safer bets are companies with strong balance sheets and solid dividends. But Scheve wouldn't have recommended Google before its IPO, either -- and "I would have been wrong," he said.

On financials: More regulation is likely for big banks, especially after JPMorgan Chase & Co.'s massive trading loss, Scheve said. That's true regardless of who is elected this fall, as no candidate wants to be seen as pandering to Wall Street. Ultimately, big banks will look more and more like utilities -- which isn't necessarily a bad thing for shareholders, who won't see big growth but can expect steady performance and dividends.

On the backlash against banks: The populist sentiment is driven by high unemployment and social unrest, Scheve said. But it's important that activists and the broader public don't shun prosperity itself. "The way you solve economic issues is through economic growth," he said. "You don't want to demonize economic success."