MainStay Marketfield

01/23/2014 5:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

 

My top conservative recommendation is a mutual fund that caught most of the major investment trends in recent years, notes Bob Carlson, editor of Retirement Watch.

"We're in a transition between economic environments," says Michael Aronstein of MainStay Marketfield (MFLDX:US), which is my favorite fund idea for the coming year.

The fund has shown stellar returns, especially when measured on a risk-adjusted basis. But the fund was flat to down during the last quarter of 2013. That's because Aronstein and his team have been shifting the portfolio, somewhat, to capture what they believe are emerging trends.

Stock valuations in the US are at normal levels, in Aronstein's view. He believes stock prices are likely to continue to advance but in a different way. Monetary policy, primarily, will drive stock prices going forward, but the increases won't be as broad-based as recently.

The MainStay Marketfield team expects that, at some point, the Fed's monetary policy will cause higher consumer prices. Rising prices will help some businesses and hurt others. The inflation is likely to permeate the rest of the economy and eventually affect stock and bond prices, in Aronstein's view.

He doesn't try to forecast when that will happen, but expects the US stock bull market will continue for 18 to 36 months from late 2013. To prepare, he's gradually shifting the portfolio.

For example, late in 2012 the fund began selling short long-term US Treasury bonds. The fund also has been increasing exposure to cyclical and resource sectors of the stock market. The fund continues to sell short emerging market stocks (except Mexico).

Aronstein believes selling short the emerging markets will remain a good position, because many emerging economies are suffering from rising inflation and outflows of capital. These pressures could result in some countries defaulting on their debts.

MainStay Marketfield also was among the first to plunge into European stocks after the Greece crisis, and that has helped returns. The fund still has significant positions in European stocks, Japanese stocks, and some sectors of the US market.

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