William Priest, chief executive and co-chief investment officer of Epoch Investment Partners, said investors may need to temper expectations for big economic growth under President-elect Donald Trump.
Priest, whose firm manages more than $40 billion, told Mike Santoli in an exclusive interview:
"You're going to have a very difficult time getting real growth to be more than 2 percent except, perhaps, through a cyclical phenomenon. Let's say, for example, you have a huge fiscal program that might run $200, $300 billion a year. That'll move the needle on real GDP. But we're almost a $19 trillion economy. It's not going to move it that much. There may be a multiplier with it, which would help. But the reality is if you get us to 2.5 percent that would be a lot. Four percent, I'm afraid, is impractical if not impossible."
On globalization, the investor warned of the risks associated with trying to interfere with free capital markets. As an example, he references the Smoot-Hawley Tariff Act in 1930, a law that raised U.S. tariffs on more than 20,000 imported products to record levels.
"If you really want to stop global trade, that's analogous to Smoot–Hawley. Smoot-Hawley is often considered a factor that led to the Great Depression. And I'm not forecasting a great depression. But there's a reason why trade works. And it's if it benefits both parties," he said.
In this in-depth conversation, Priest, who started his first investment firm in the early 1970s and then later sold it to Credit Suisse, also discusses:
- Why the end of P/E expansion may be near.
- Changes in the investment landscape.
- The factors that could support the stock market.
- How to succeed in active management.
PRO subscribers can also read the entire transcript of the exclusive interview below.