Bloomberg TV"Market Pulse" May 15, 2007
Nick P. Calamos Discusses Mid-Cycle Slowdown, Market Shift
Naperville, IL, May 15—Nick P. Calamos, senior executive vice president and co-chief investment officer of Calamos Investments, said now that investors are starting to realize that the economy has slowed, the shift to stable growth companies that the firm has been anticipating has begun to emerge.
Calamos talked about this shift in market sentiment in an appearance Tuesday on Bloomberg Television's "Market Pulse." He also discussed rolling recessions, GDP growth, current levels of inflation and his thoughts on what the Fed's next move will be.
"People are starting to face the reality that earnings have slowed and volatility has increased" Calamos said. "This makes people a little nervous," but it also "gets people more focused on stable growth companies again."
Calamos said he's not overly concerned that the sluggishness in the housing market will lead the economy into recession. In the past 25 years, he explained, the diversified global economy has proven its ability to absorb rolling recessions without the economy suffering a major recession. In the '80s, there were recessions in agriculture, commercial real estate and rust belt industries; in the '90s, it was banks, airlines and mining companies.
"We don't think the rolling recessions [in today's market] will push the whole economy into recession," he said.
Calamos also said mid-cycle slowdowns are very normal. And although we may see additional layoffs and somewhat higher unemployment, corporate balance sheets are strong, productivity is high and net worth continues to climb.
"Overall, the economy and the consumer are in good shape," he said.
Furthermore, he said, inflation appears to be under control. With ample liquidity in the global markets and sufficient access to credit, "there's no need to raise rates here, clearly; but there's no reason to lower rates either."
"Inflation is an extremely important discounting mechanism in the global markets," he said. "As long as inflation remains in check," the economy should be able to sustain itself.