What: Discussion of the stock markets near year's end.
Where: Bloomberg Live
When: December 12, 2006
Who: Bllomberg Live host Luke Napoli, Darin Richards (AKT Wealth Advisors LP)

Luke Napoli: Joining us now to talk more about the markets, Darin Richards, Chief Investment Officer at Wealth Advisors in Lake Oswego, Oregon. There were no real surprise today from Federal Reserve policymakers. What was your focus in the session?

Darin Richards: There wasn’t a surprise at all and if you look at both the equity and the fixed income market you saw little change so, I think the biggest thing is now we’re kind of picking apart the language and they added substantial cooling in front of the housing market. I think if nothing else that really points out that the Fed definitely is in tune with what is going on and it’s something they’re keeping an eye on. I think it maybe made their statements a little bit more dovish then they were in the prior meeting.

Luke Napoli: Darin what do you expect the markets to do when they come back tomorrow after they’ve digested what the Fed said in today’s statement?

Darin Richards: I don’t expect the comments really to have much carryover for tomorrow I think it was pretty straightforward and a lot of it was already priced in expectations. The Fed pretty much came in line with majority with what people were expecting. I don’t think you’re going to see a lot of change tomorrow even though we had a day to digest what their statements were.

Luke Napoli: The slow down in housing that you and the Fed mentioned also the slow down in manufacturing. what does that mean for you and your investments decisions in coming months?

Darin Richards: We’re keeping a close eye on housing and I think when you look at the unemployment situation and you see 4.5% percent unemployment that would typically be an environment where you would expect very solid consumer spending yet you see a little bit of this sentiment going in the opposite direction. So not just from a housing, from a price standpoint, but we’re keeping an eye on housing from an employment standpoint. I think it’s seeping in the way where maybe employed people are a little bit nervous about their future employment. Again, we think that may curb a little bit of retail sales for the holiday season. and we’re kind of keeping an eye on it and if looks like things are getting worse, we will become a little bit more defensive in 2007.

Luke Napoli: Where are you looking to fit your money right now? What kinds of stocks are you buying? What kind of stocks are you selling?

Darin Richards: We’re more asset allocators than we are actual stock pickers. But our overweights right now are in large cap stocks. We like large cap from an evaluation standpoint as well as a diversification. A big percentage of their sales come internationally so the weakening of the dollar and the strength globally actually helps large cap stocks generally more than it does small and mid cap stocks. We are overweight international equities both in Europe and Asia--and emerging market equities. So we’re looking for growth and we’re seeing more growth overseas. It looks like their recovery is in an earlier stage than ours; we’re kind of talking about reducing rates and they’re still talking about increasing rates overseas. We like the growth prospects internationally.

Luke Napoli: Darin, you mentioned that those groups classified as defensive might become more attractive. Well healthcare is one of those groups that is underperforming—lagging--the events in the market this year. what’s your view of the healthcare group?

Darin Richards: I think healthcare is a great safe play when you think of a slowing economy. It’s one of the areas where regardless of what’s going on in the economy, it’s really difficult to cut back on healthcare expenditures. Even though the Fortune 500 companies keep talking about that’s one of their biggest issues with expenses and they want to cut it, they’ve failed to be able to reduce that so it shows a lot of pricing power and again if you see a slowdown, that’s one of the areas where you’re see  a lot of money migrate to.

Luke Napoli: We’ve only got a couple of weeks left in 2006. Is this about where the market’s going to end up for the year?

Darin Richards: I think so. I think we’ve had a great run…maybe started a little bit earlier than it normally would. Again, retail sales I don’t think are going to come in and be stellar. So I think you’re going to see things finish up and most investors are going to be happy you know getting 13-14% returns that they have over the last year.

Luke Napoli: Ok, Darin Richards, Chief Investment Officer at Wealth Advisors in Lake Oswego, Oregon joining us this Tuesday, December 12th to talk about the stock market.

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