The six-year bull market seems to be at a crossroads, with rising interest rates, declining oil prices and a presidential election ahead.
John Calamos Sr., Chairman, CEO and Global Co-Chief Investment Officer of Calamos Investments, which has more than $23 billion of assets under management, told Yahoo Finance’s Alexis Christoforous in the video above that he is still positive on the economy and the markets for the next year. Calamos says the Federal Reserve’s modest increase in short-term rates was long overdue and indicates the economy will continue its pace of steady growth.
Calamos takes a long-term view on investing and believes equities (^DJI, ^GSPC, ^IXIC) are still the place to be next year because historically stocks tend to do well during periods of rising rates, especially growth-oriented stocks.
“We are bullish on equities over the long-term. We do think it’s a slow growth environment that will continue into 2016… we do like equities over bonds in this environment that we’re in,” Calamos says.
On the fixed-income side, Calamos believes that rising interest rates create significant headwinds for traditional fixed-income securities such as government bonds (^TNX) and investment grade corporate bonds.
Calamos, who is a pioneer in using convertible bonds to manage risk, explains in the video above how convertible securities combine the attributes of stocks and bonds, and why he thinks it’s a good way diversify one’s asset allocation.
“Convertibles have done very well in a rising interest rate environment. So we're seeing a lot of traditional fixed-income investors put convertibles in their fixed income asset allocation, anticipating interest rates rising here.”
Calamos remains underweight in the energy sector and views the recent slide in oil prices (CLF16.NYM) as positive for the overall economy and the consumer.
Calamos expects to see more stock market volatility over the next few months --not only because of monetary policy--but also because of upcoming key elections in the U.S. and abroad.
“The uncertainty of our fiscal policy going forward is going to cause market volatility,” he points out.