Nuveen V.P. paints economic picture for FMA society

Andrew Zasowski

This past Wednesday, the Financial Management Association hosted a presentation by Craig Snyder, vice president of Nuveen Investments. Those not from the immediate area may not be familiar with Rittenhouse Asset Management, a subsidiary of Nuveen Investments, based minutes from Villanova in Radnor, Pa. Rittenhouse Asset Management is one of four companies: NWQ, Nuveen Asset Management and Symphony. All four combine to make up the parent company of Nuveen Investments and manage approximately $80 billion in assets.

Snyder’s focus ranged from valuation and modern portfolio theory to the current spike in the stock market, which was six days old on Wednesday, but continued upward until this past Monday. The picture that Snyder painted of the current economy contrasted greatly with the dismal reports seen in the Wall Street Journal daily in the past two years. A few reasons for prospective investors to be optimistic were the current undervaluation of the market, lessons that history has taught us and record low interest rates.

According to Snyder, the U.S. equities market is currently undervalued by a ballpark estimate of 10 to 15 percent after the dramatic upswing last week. The implications of our economy being undervalued by 10 to 15 percent are tremendous. Assuming the market rebounds, which is highly likely, a gain between 10 to 15 percent on investment would take place just for the stock to correct itself and trade at its “fair value.” This may seem like only numbers, but once the rebound begins, the effects will be ever-present in the availability of jobs, which many current upperclassmen are scrambling to find now.

Somewhat related to the undervaluation of the market is the lesson that history has taught us. This valuable lesson, which Snyder depicted through the use of a number of charts and graphical illustrations, was summarized simply as “regression to the mean.” By regression to the mean, Snyder refers to the ability of the stock market to always correct itself and tend toward an average. This regression validates Snyder’s statement that what is important is “time in the market, not timing of the market.” History has taught us that the stock market gradually grows over time. Considering this fact, it is justifiable to think that over a long period of time your average stock will produce some amount of return.

The final glimmer of hope in our current economy are the record low interest rates that have characterized the monthly meeting of the Federal Reserve Board for the better part of the past two years. This past week, the Federal Reserve Board met and agreed to maintain the current miniscule interest rate of 1.25 percent. What does this mean for an economic rebound? The low rate will result in a vast amount of borrowing once the upswing begins. If investors today were certain our economy was recovering, a massive amount of borrowing would take place at a very low interest rate before the Federal Reserve Board met again to adjust the rate. This possibility could occur if the economy rebounds sharply in a short period of time such as the usual growth following a war.

For the reasons above, one left Snyder’s presentation having learned an extensive amount of information on investing as well as feeling reassured about the current state of our economy. Looking toward the postwar future, investor confidence is integral to any possibility of an economic rebound. If the United States can quickly expel the threat in Iraq without major complication, then investor fears will be assuaged.

Subsequently, investor attention will shift and refocus on the economy and corporate earnings, which will result in the market growth that we all desire. Hopefully, these factors will fall into place sooner rather than later and jumpstart an economic rebound to break open the job market for the class of 2003.

For comments or questions, e-mail Andrew by e-mail at [email protected].