This money manager sees no end in sight for bull market

Published: May 30, 2017 12:54 p.m. ET

Hank Smith of Haverford Trust expects good times to continue for stock investors, but with lower returns

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Even if President Trump cannot get Congress to support any of his major economic initiatives, Hank Smith of Haverford Trust believes a recession is not likely over the next year and a half because of the stimulative policies of the Federal Open Market Committee, led by Federal Reserve Chairwoman Janet Yellen.



Hank Smith of Haverford Trust believes the stock market will be helped if President Trump gets the tax-reform bill he wants, or an infrastructure spending bill and additional regulatory relief. But if Trumps gets nothing more from Congress, Smith believes a more cautious Federal Reserve will provide plenty of backing for stocks.

Smith is co-chief investment officer of Radnor, Pa.-based Haverford Trust, which has about $7.2 billion in assets under management, mostly in private accounts for individuals and institutions. He is also the chairman of the management team for the Haverford Quality Growth Stock Fund HAVGX, +0.06%

During an interview on May 26, Smith referred to those two scenarios as a “win-win” for stocks, but also cautioned that a “rebalancing” of portfolios more toward defense positions might be best for the next few years. “Thematically over the past four years, we have had a balance between what we call offense and defense, offense being cyclical exposure and defense being consumer staples and health care.”

Here’s why he is confident that the current economic expansion, which began in June 2009, will continue: “If Trump gets nothing done, gets bogged down with all these investigations and Congress becomes increasingly dysfunctional and nothing is passed, we will still be in a 2% growth economy with little chance of recession over the next 18 months. In that scenario, the Federal Reserve will raise rates at a glacial pace.”

“The stock market has already shown it can perform in this environment,” he said.

“That said, we also have to recognize that this has been a very strong bull market. It is unlikely over the next three years that we will have the kind of returns we have had,” he added.

Read: What 10 million simulations tell us about President Trump’s chances of achieving 3% economic growth

The S&P 500 SPX, -0.09%   has had an average return, with dividends reinvested, of 15.3% over the past five years, through May 25, according to FactSet.