Chief Investment Officer Of HighMark Capital Sees Equity Returns Outpacing Earnings Growth Of 23% In The Global Markets

• On 3:23 pm EDT, Wednesday October 21, 2009

67 WALL STREET, New York - October 21, 2009 - The Wall Street Transcript has just published its TWST Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This 34 page feature contains expert industry commentary through in-depth interviews with Award Winning Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Top-down and Bottom-up Opportunities-Active Management-Multiple Asset Allocation-Tactical Asset Allocation-Canadian Stocks-Debt/Equity Ratios-Qualitative and Quantitative Approach-Large Cap Opportunistic Value-Low Valuation-Sustainability of Return-Price-to-Earnings-Price-to-Book Value Basis-Uncovering Compelling Values-High Returns on Investment

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In the following brief excerpt from just one of the in depth interviews in the 34 page report, an experienced top tier money manager discusses the outlook for the Global Markets and for investors.

David J. Goerz, Senior Vice President, Chief Investment Officer, joined HighMark Capital Management in 2003. As CIO, Mr. Goerz provides leadership to all of HighMark's investment activities. He chairs the Investment Policy Committee and the Asset Allocation Committee, as well as being a member of the Executive Committee and Board of Directors. Mr. Goerz has more than 19 years of investment management experience. Prior to joining HighMark, he was Chief Investment Officer of mPower Advisors and Morningstar Associates, subsequent to acquisition. Previously, he was Director of Global Asset Allocation Research and Portfolio Manager, as well as serving as Chairman of the Asset Allocation Strategy Group for Wellington Management. He also held portfolio management and senior investment research positions with TSA Capital Management and ARCO Investment Management. Mr. Goerz regularly appears on CNBC, Fox Business News, as well as Bloomberg TV and Radio. He also is quoted frequently in various investment periodicals. He also serves on the Board of Directors for Axioma, Inc., an investment software company. Mr. Goerz received his BS degree from UCLA in Applied Mathematics and a Masters degree in Operations Research Engineering from Stanford.

TWST: You mentioned job growth in the emerging markets, but what are your views on the global economy and emerging markets?

Mr. Goerz: We believe there are several important secular drivers of global growth related to emerging markets that are important to keep in mind. Sustaining economic growth depends on developing new products and expanding markets. Thus, the most critical force continues to be urbanization and industrialization of developing economies. China, India, Latin America, and emerging Europe are shifting their dependence from exports, becoming increasingly dependent on internal domestic growth. There are 5.5 billion potential consumers in emerging markets compared to just one billion consumers living in developed countries. With a regular paycheck and as credit facilities develop with expansion of irrepressible consumption demand, exceptional secular growth could exceed developed markets. Global consumption can no longer rely predominantly on the American consumer. The next cycle will evolve to favor global consumers, which may have uniquely different desires and lifestyle choices. Companies must become more adaptive to be globally competitive. America has always been an engine of innovation, adapting to new challenges and exploiting new opportunities. We observe signs of businesses tackling new challenges, such as alternative fuels or electric cars, that help advance our desired standard of living and will create new jobs. Global operating efficiency is high and rising. Hyper-competitive businesses are maintaining higher profit margins that should attract foreign capital, and bolster the dollar. Outsourcing and Internet pricing transparency contribute to globalization, as well as the drive for innovation and creativity.

TWST: What do you see for stocks and bonds going forward?

Mr. Goerz: We see constructive signs that the global economy is improving, and earnings forecasts have turned up with accelerating growth expected in 2010 and 2011. Equity prices probably discounted the worst possible outcome through March, but current prices are still well off previous highs. Equity returns could outpace earnings growth of at least 23% in both 2010 and 2011 as equity markets rebound to historically consistent valuations. On the other hand, Treasury yields should rise toward 5%, resulting in underperformance of bonds. This will be quite a contrast from the difficult period we've just observed since 2007. Inflation should accelerate toward 3% by 2011, which typically would be quite benign, but is higher than current economic forecasts. An upside surprise to inflation, such as this, would likely adversely impact bond returns. We are still exposed to credit. High yield spreads have tightened significantly, but have only just reached the last peak in 2002, so we believe they have further to go. Higher quality investment grade bonds provide only a slight premium to historical averages, although default rates are expected to remain elevated for a while longer. Our current asset allocation recommendation favors equities with a recommended 5% equity tilt versus a 60% strategic policy target. Our underweight to bonds of -8% is near the lower end of our range, with the difference of 3% in cash, helping to lower our duration even further than the 90% target we are maintaining within our portfolios. We favor U.S. equities and emerging markets versus international developed markets. We have shifted client portfolios from being overweight growth stocks at the beginning of this year to favoring value stocks, but also hold a larger overweight to small-cap stocks.

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