This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Economic Recovery May Be Long and Painful

SEATTLE ( TheStreet) -- Short-term bonds and small-cap stocks are the best way to play a potentially long U.S. economic recovery, says Bryce James, manager of the Aston Dynamic Allocation Fund (ASENX).

The $52 million fund has returned 17% over the past year, according to Morningstar (MORN). James invests in exchange-traded funds, shifting the portfolio's money around frequently.

A Rocky Recovery (Forbes)

Welcome to TheStreet's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

What is your view of the U.S. economy?

James: We are still in a debt reduction phase and I predict this market won't trend upward until it unwinds its attraction to borrowing. When I entered into the business in 1983, nobody borrowed money because the memories of the Great Depression were etched in the minds of investors. The current decision makers, consultants, brokers, financial planners, and investors are too young to remember the carnage and therefore are deemed to repeat the past.

The Federal Reserve policy to manage the economy for decades has simply been to increase or decrease the money supply as if it were a car with a throttle and brake. My forecast is that the economy will continue with these painful ebbs and flows, fits and restarts until the debt levels shrink from their current levels. I wouldn't be surprised to see the market value unchanged in another five years. Dividends are near an all-time low, price-to-earnings ratios are high and real estate is not done unwinding. The next leg of pain will come when credit tightens further and interest rates rise.

What are your favorite sector exchange-traded funds?

James: Short-term fixed income is still our favorite sector, specifically the iShares Barclays 1-3 Year Treasury Bond ETF (SHY), which makes up around 20% of our fund. Our domestic equities are more focused on value, health care and utilities. The iShares Russell 2000 ETF (IWM) is our largest equity fund holding at close to 10%.

What is your least favorite sector ETF?

James: We simply don't like ETFs with high volatility and/or low expected return. We do not make sector bets or try to fill up the style box. So the best way for me to address this question is to identify those areas where we have little if any exposure, such as long-term fixed income, where we have no exposure, and real estate, which only makes up 6% of the portfolio.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%
TSLA $229.64 5.22%
YHOO $33.16 0.61%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs