"I'm a big believer in mean reversion [a theory suggesting that prices and returns eventually move back towards the average], so for the last three years the average rate of return of stocks are down 9 percent—conversely 10-year Treasurysare up 9 percent," he said.
"That's an 1800 basis-point swing. If you are a longer term investor it's a good time to be trending out of high-quality fixed income and beginning to feed the equity market," Zinman said.
"It's a terrific recipe to have a strategic allocation in stocks. We are telling our clients to overweight large cap, high quality domestic equities and emerging market equities," he said.
Similarly, in the bond market, "the safe haven part of bonds is what we are avoiding, such as U.S. Treasurys. Instead, we are trying to focus on spread product because it's still attractive— specifically in high yield, non-dollar debt, emerging market debt and international soverance, Zinman said.
The Credit Suisse executive sees two areas of the financial sector investors should pay attention to:
- Financial Preferred: This has very good yields relative to other types of fixed income, specifically trust preferred, which have lower duration and good yields.
- Financial Stocks: If you're patient, over time financials should do very well.
"The alternative investment world is still a ripe world for investing for individuals," he concluded.