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Highlights Day 4: Benefits of mergers, art market 'frothy'

November 19, 2015 7:11 PM EST

Ed Yardeni, president of Yardeni Research Inc, speaks at the Reuters Global Investment Summit in New York November 19, 2015. REUTERS/Brendan McDermid

By Sam Forgione

NEW YORK (Reuters) - Ed Yardeni of Yardeni Research said on Thursday he was bullish on U.S. shares given the prevalence of merger activity and share buybacks, while Margaret Patel of Wells Capital Management said real estate looked fully-priced and art looked "frothy."

Mario Gabelli, chief executive officer of GAMCO Investors Inc, said there would be more mergers and acquisitions activity in the cable industry, while Rod Paris of Standard Life Investments said markets may be underestimating wage inflation in the United States next year.

Those were some highlights from Day 4 of the Reuters Global Investment Outlook Summit, where investors spoke on topics such as the impact of a potential U.S. interest rate hike in December and their top investment plays for the coming year.

ED YARDENI, founder of Yardeni Research

Yardeni said the Federal Reserve may hike rates in December, but Fed Chair Janet Yellen could immediately signal that the U.S. central bank would delay subsequent rate hikes.

"It is conceivable that they raise the fed funds rate 25 basis points and the dollar goes screaming to the upside for about half an hour, and then Yellen gives her press conference and does everything she possibly can to talk it down," Yardeni said.

He said he was bullish on U.S. stocks, despite not being very optimistic on earnings, since companies would continue to buy back their shares and do acquisitions.

"M&A is bullish...as an investor, if I have fewer drug companies to invest in, and I want to invest in healthcare, it means that more money goes into fewer companies."

MARGARET PATEL, senior portfolio manager at Wells Capital Management

Patel said the Fed's easy money policies have weighed on the U.S. economic recovery rather than bolstered it, and have contributed to inflation in assets such as art, various parts of the equity market, and real estate.

"We would have recovered perhaps faster if we hadn’t have had interest rates at zero," Patel said. She said there was likely a high degree of liquidity in the system that was being masked.

"Various parts of the equity market look very fully-priced. Real estate, as a real asset, looks rather fully-priced, and even something like art, which is a market that can be very volatile, looks as if it's pretty frothy. So even though we can’t see it, it looks as if there must be a lot of liquidity in the system," she said.

ROD PARIS, chief investment officer of Standard Life Investments

Paris said markets may be underestimating U.S. wage inflation next year, putting further upward pressure on the dollar, already the world's most crowded trade.

"The absolute key ... is understanding the nature of inflation pressures in the U.S.," Paris said. "The risk is we have quite tight labor markets, the risk is of cost-push pressures ... and that the accepted wisdom around the pace of U.S. policy move is actually understated. The implication there is for the dollar to get into seriously over-valued territory."

Europe, meanwhile, continues to face deflationary pressures but European equities look attractive for next year, Paris said, with economies such as Spain and Britain benefiting from domestic demand.

MARIO GABELLI, chief executive of GAMCO Investors Inc

Gabelli, a billionaire value investor, predicted more mergers and acquisitions activity in the cable industry.

While Time Warner Inc (NYSE: TWX), owner of premium cable network HBO, deflected a bid from Twenty-First Century Fox Inc (NASDAQ: FOXA) last year, Gabelli said he expects Time Warner to be involved in a deal at some point.

"Something is going to happen," he said. "HBO is an extraordinary asset."

KEN LAMBDEN, chief investment officer of Barings

Lambden said European Central Bank monetary stimulus could taper off if European growth starts to strengthen. In that scenario, there could be a bounce in the euro, he said.

"If you buy the fact that perhaps the U.S. dollar is not going to perform as well as it has done -- and part of the argument is that we don't think U.S. growth is as strong as it looks -- then the euro through 2016 will start to look comparatively more attractive," he said.

He suggested this strength might come through in the latter part of the second quarter.

Follow Reuters Summits on Twitter @Reuters_Summits

(Reporting by Carolyn Cohn, Jessica Toonkel, Jonathan Stempel, Claire Milhench, Ross Kerber, Svea Herbst-Bayliss, and Herbert Lash; Editing by David Gregorio)



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