Trendspotting in uncertain times

It’s Belski’s job to analyze markets in the U.S., Canada and globally, then develop strategies based on the broader trends. Belski and his team also will suggest particular names that fit with the overriding themes. Their research is used internally within BMO, as well as by clients such as hedge funds, institutional funds and retail financial advisors looking to add extra juice to their clients’ portfolios.

“I’m like an analyst,” Belski says, “but my job is to analyze the entire market, not a specific sector, industry or style.”

Although Belski believes the U.S. market probably already has reached its highs for this year, his case for a bull market lurking in the woods is based on what he calls “three legs of the stool.” In his view, corporate America has done an excellent job since the financial crisis of 2008 in cutting costs, strengthening balance sheets and building cash. The second leg, the consumer, also has become more conservative, trimming credit card debt and other loans, and generally tidying up the financial house. The third leg is the government, and Belski believes positive change is coming via cutting costs through greater austerity and building revenue through tax reform.

“The government needs to take the same approach as the consumer,” Belski says. “Changes are coming, either later this year or early next year. It will happen more slowly if the current administration remains in power after the election, and faster with the Republicans. But it will come either way.”

Belski believes a single government makes it much easier to bring change in the U.S. than in Europe, and adds: “Incremental growth in North America will more than offset any slowdown in Europe. The risk of economic contagion is low, although there could be emotional reactions to events in Europe.”

Belski expects the Canadian market to do well, but not as well as it has during the past decade, when it was driven by strong demand for resources. Market leadership is always changing, he says. In the late ’90s, market action was lead by technology stocks; in the ’80s, it was consumer stocks; and in the ’70s, it was energy stocks.

“The next cycle won’t be led by the same industries,” Belski says. “I would advise Canadians to be diversified, and not to have all their eggs in one basket.”

Belski suggests that now is a good time for Canadians to be looking at high-quality, large-cap, U.S.-based companies, particularly those with a global business focus and shares with the potential for dividend growth. He also suggests investors need to be highly discerning about the stocks they own in this slow-growth economic environment with its extreme stock market volatility.

During the period that began in March 2009 and continued into the early part of this year, Belski says, investors have concentrated on high-risk, high-volatility stocks that do not necessarily represent high quality. These stocks have done better than the market when it rose but worse on the downside when things moved in the other direction.

“The focus should be on high-quality, U.S. large-caps,” Belski says. “They are lean and mean; they’ve built up their balance sheets and earnings; and dividends are stable. And they have cash. They can buy back stock, use their cash for mergers and acquisitions or raise their dividends.”

Belski says there is currently a “tremendous amount of money” in the bond market, where there is little potential for growth. And if some of this money finds its way over to the equities side, it could be a positive force for stock prices.

Prior to joining BMO, Belski had been CIS with Oppenheimer & Co. in New York. He first entered the workforce in the autumn of 1988, after graduating from St. Cloud State University in Minnesota with a finance degree. Jobs in the investment business were hard to find in the wake of Black Monday in October 1987. As a result, Belski ended up working two full-time jobs, one as a bartender and the other in the accounts-payable department of a local marketing company. But it wasn’t long before Belski moved to Los Angeles and found a job as a research analyst with William O’Neil & Co., then Investor’s Business Daily Inc.

“There are always opportunities if you’re willing to work hard and do whatever it takes,” Belski says. “When I moved from the Midwest to the West Coast, I brought something different: I had the finance degree with an emphasis on accounting and the Midwest work ethic.”

After almost four years in L.A., Belski and his wife decided to move back to Minneapolis to raise their family. Belski got a job as a technical market analyst at Dain Bosworth Inc., and later moved to Piper Jaffray & Co. as its chief fundamental strategist. Belski then joined Merrill Lynch & Co. Inc. in New York as chief U.S.-sector strategist. In 2008, following a two-year stint living on the East Coast, Belski decided to relocate to Minneapolis. Ever since, he has been taking a two-hour flight to New York every week and coming home on weekends to be with his wife, son and daughter.

Now, with his new job, Belski is flying between Minneapolis and Toronto and other points across Canada to meet clients. He’s also frequently in New York. “With my midwestern background, I’m used to winter,” he says. “I’m not afraid to come to Canada in February and go to a hockey game.”

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