Why 2017 May Call For Tactical Asset Management

December 16, 2016

There are reasons to be optimistic about 2017, and reasons to be extremely cautious, says David Haviland, managing partner and portfolio manager of Beaumont Capital Management, based in Needham, Massachusetts. Here, he shares his outlook, his concerns, and why he thinks the New Year might be a good time to consider going tactical.

ETF.com: What's in store for investors in 2017?

David Haviland: I’m cautiously optimistic. What we’ve been experiencing since the election has been a classic buy-the-rumor rally. And the rumor is all of the promises that President-elect Trump had made during the campaign. If everything goes well, then I think everything's fairly valued.

We’re talking about tax cuts, both at the corporate level and the individual level; the infrastructure stimulus he's proposed, which is $1 trillion over the next 10 years; and the promise to renegotiate some of the trade agreements to make sure they’re fair.

If all of these things come to fruition, the hope is that we're going to get some reflation into the world economy, and that the velocity of money should increase a little bit. All of that holds for a very bright future for the U.S.

However, you've still got to make sure we don't go too far. Specifically, I understand what President-elect Trump is trying to do with China, but if he takes it too far too fast, we're messing with the world's second-largest economy. We don't want to jeopardize that relationship, let alone with the EU or elsewhere in Japan.

With the infrastructure buildout, this is very, very enticing to me, because of the need for infrastructure throughout this country. If this gets muted to the point of not being big enough of a spend to make an impact, there could be a lot of disappointment in the investment world.

ETF.com: Is there a risk of spending too much in infrastructure?

Haviland: A trillion dollars over 10 years is basically $100 billion a year. That is a rounding error to our federal budget. So, I would argue, no. Also, you're going to be employing a lot of people.

Those people will then pay federal and state income taxes. So a lot of this money will not be for naught and just wasted away if we're actually building something and employing people in doing it. The governments will get some of that money back. And most importantly, now you've got more Americans being put at work and they get to spend money.

The best way to get rid of high debt as a percent of GDP is to grow the economy. So there are a lot of benefits here. If we just fritter the money away, I suppose, yes, that could become an issue.

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