Bullish Bears, Bearish Bulls: Picton, Wilson & Belski Weigh in
Be fearful when others are greedy, and greedy when others are fearful. - Warren Buffett
by Pierre Daillie, Managing Editor, AdvisorAnalyst.com
At Picton Mahoney’s Alternative Exchange1 event in mid-November 2024 (you’ll have to register to watch it – it’s worth your time), three of the industry’s boldest voices—David Picton (CEO at Picton Mahoney Asset Management), Mike Wilson ( Chief U.S. Equity Strategist & CIO at Morgan Stanley), and Brian Belski (Chief Investment Strategist & Leader of the Investment Strategy Group at BMO)—stepped onto the stage. With the U.S. political sands shifting once again and markets whipsawing on every rumour, the trio delivered a message as nuanced as it was unvarnished: beneath the upbeat “soft landing” narrative lurks a complex reality demanding a steadier hand than mere hope.
“You can never be out or in,” said Wilson, pushing back against the false dichotomy of bulls versus bears. “There’s always something to be bullish on. There’s always something to be bearish on.” Indeed, the market’s manic year—a wild carousel of “soft landing,” “no landing,” and “hard landing” spins—exemplifies that real pros never stop navigating the storm.
Belski, who’s carried a permanent bullish torch since 2009, offered a sobering caveat: “If you’re looking for fireworks today, the bull versus the bear, you’re probably not going to get them.” A 25-year secular bull market might still be in motion, but Belski openly admitted being “scared shitless” by his own recent outperformance. When a long-term bull gets jittery, it’s time for everyone to recalibrate expectations.
A Once-Clarion Call for Europe Goes Silent
For years, talking heads swore Europe was a value play waiting to blossom. “Europe’s a value trap,” Belski deadpanned, shattering yet another go-to storyline. Wilson concurred. If just a year ago China felt “uninvestable,” now that label is shifting to Europe. Contrarian alert: “When everybody says it’s uninvestable, it probably means it’s most investable,” Wilson teased. Still, the consensus is clear: capital is migrating toward the more stable environments of the U.S. equity market, and it’s hard to fight the gravitational pull of those mighty American shores.
Cheap Doesn’t Mean Easy
David Picton summarized the room’s frustration: valuation are stretched and credit spreads are narrowed, magnifying the question: where to deploy capital when the easy gains are gone? Wilson’s answer: “You have to lower your expectations.” Sure, some unloved areas—from beaten-down Chinese stocks to overlooked plays in the financial and commodity spaces—may surprise. The financial sector, unloved since the pandemic, could perk up under deregulation. Commodities, especially natural gas, remain under-invested. “We have more power needs now, not less,” Wilson said, describing natural gas as “a multi decade investment thesis.”
In a world obsessed with ESG purity and all things green, the panel’s frankness was refreshing. Wilson championed a pragmatic energy mix, acknowledging renewables while insisting we “can’t all rely on solar farms and wind farms.” If that notion makes some ESG purists squirm, tough. In a serious market, playing only fashionable chords leads to missed opportunities.
Stock Picking: A Lost Art Returns
Belski skewered the lazy habit of buying sector ETFs. Why pick a semiconductor ETF that includes “a piece of shit company called Intel” when you could just buy Nvidia directly? Crude but fair. The market’s dispersion of returns demands more nuanced analysis. “If you actually really start talking about what stock picking means… that includes work,” said Belski. In a world where robots and algorithms dominate, the old-school skill of rolling up your sleeves and analyzing companies is becoming a competitive advantage again.
That’s not just talk. The panel highlighted financials, especially regional banks, as structural winners post-deregulation. Smaller, relationship-driven lenders—think Glacier Bank Corp. in Montana—can shine amid regulatory shifts and local know-how. Meanwhile, the next big theme—reshoring U.S. manufacturing via robotics and AI—remains a fertile field for investors who can sniff out tomorrow’s winners before the herd arrives.
AI’s Hidden Winners
Everyone knows about Nvidia, Apple, Google—the AI poster children. But what about the companies quietly embedding AI into their business models, like Costco’s inventory management or TD Bank’s customer interactions at the ATM? “Oracle has had a tremendous run,” Belski noted, hinting that first-phase AI adopters aren’t limited to Big Tech alone.
The key: think broadly. The internet’s first wave enriched those who exploited its infrastructure, not the ones who built it. AI will mirror that dynamic. Just as Amazon, Google, and Apple thrived thanks to someone else’s digital toll roads, today’s AI “adopters” may outshine the initial hardware darlings.
Trump 2.0: Inflation and the Great Unknown
The panel’s stance on the second Trump administration: don’t be lazy and assume a replay of 2016. Fiscal constraints are tighter, immigration policy more contentious, and growth levers less obvious. Wilson warned that if government shrinkage fails to materialize, “inflation is coming back.” But if it does happen, and government workers transition productively to the private sector, we might craft a new equilibrium in that elusive 2-3% inflation zone.
Belski emphasized another overlooked angle: small and mid-cap stocks. Underowned and unloved, these categories could flourish in a re-invigorated domestic economy. Long-term value, coming out of the weeds while the crowd obsesses over FANG 2.0.
Geopolitics: Don’t Overthink It
Belski dismissed building “doomsday portfolios” since you can’t collect on Armageddon. Fundamentals trump fear. Sure, Taiwan, the Middle East, Europe—it’s a messy world. But “the stock market is a market of stocks,” Belski reminded. Focus on what you can control: quality U.S. names and, if you’re feeling lucky, some Canadian gems. Market corrections are inevitable. Geopolitical flashpoints? Impossible to predict and, historically, always buying opportunities on the other side.
Diversification and Debt: Back to Basics
2022’s fiasco when bonds and equities fell together shook some faith in diversification. Wilson’s advice: don’t throw the baby out with the bathwater. With real yields at rare highs, bonds deserve a seat at the table. Alternatives, dividends, and value add spice. “Buy scarcity and sell capacity,” advised Belski. A shrinking universe of small-mid caps is a playground for stock pickers. As for the U.S. deficit and debt balloon, Wilson says the “bond vigilantes” and rationalization will eventually force discipline—or else.
Key Takeaways:
Lower Your Expectations: The easy money has been made. Expect subtler gains and more nuanced positioning.
Stock Picking Renaissance: Dispersion is back. Sector ETFs won’t cut it. Roll up your sleeves and do the homework.
Beware the Value Traps: Europe may look cheap, but Belski calls it a “value trap.” Look for hidden gems elsewhere.
Energy Pragmatism: Green dreams are noble, but natural gas and other “old-school” fuels remain crucial. Don’t ignore reality.
AI’s Next Phase: The infrastructure layer of AI was just Act One. The smart money seeks the next wave of beneficiaries—likely less obvious and more diversified.
Watch for Fiscal Discipline: Trump 2.0 isn’t Trump 1.0. Government shrinkage could be disinflationary…or fail, reviving inflation. Stay nimble.
In the end, Picton, Wilson, and Belski made one thing clear: narrative complacency is dangerous. Whether it’s the supposed “soft landing” or the hunt for the markets’ next winners, investors must keep their heads on a swivel. This market loves to reward those who think differently, pick carefully, and never stop asking tough questions.
Don’t sell yourself short – this 48-minute keynote, as well as the other sessions at Picton Mahoney’s Alternative Exchange are worth registering for to watch.
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"Alternative Exchange 2024." 5 Dec. 2024, go.pictonmahoney.com/alt-ex.