The Federal Reserve is on the investor’s side and therefore, stocks will ultimately see a boost, said Rod Smyth, chief investment strategist at Riverfront Investment Group.
The alternative is that "you believe the Fed cannot prevent deflation and that we’re going into deflation, that is the only reason you hold bonds,” Smyth told CNBC.
Last week, the Fed said it is ready to provide more supportfor the economy and expressed concerns about low inflation. Analysts interpreted the move as a signal that the Fed would eventually embark on a second round of quantitative easing.
“If you believe that the Fed can’t generate growth, but they can prevent deflation, then the choice becomes easy—which is that stocks are yielding as much as bonds," said Smyth.
Smyth said a global portfolio of stocks is as good a bet against bonds as it has been in 40 to 50 years. (Read a second opinion: Shorting Bonds Will Be 'Trade of the Decade': Doug Kass)
Scorecard—What He Said:
- Smyth's Previous Appearance on CNBC (Sept. 8, 2010)
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Disclosures:
No immediate information was available for Smyth or his firm.
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