5 money moves a ‘risk-on’ strategist is making now

Bernard Baumohl.

Maybe Bernard Baumohl hasn’t peered out of his window lately. The economist’s upbeat outlook for U.S. and global stocks and commodities isn’t shared by many of his fellow fiscal storm watchers.

To Baumohl, chief global economist at The Economic Outlook Group in Princeton, N.J., the U.S. and other major economies are on the cusp of stronger growth.

Baumohl expects the U.S. economy to grow 3.2% in 2013, with unemployment falling to 7.2% by the end of next year. Even the comatose euro zone should see full-year growth of 1.5% in 2013, he predicts.

“The U.S. economy is fundamentally in better shape than it was four or five years ago,” Baumohl said. “Corporate profit margins are the widest they’ve ever been. Companies are sitting on a pile of cash that is ready to be utilized. We have seen housing show signs of life, and real incomes have picked up because inflation has been modest.”

He added: “The groundwork has been laid to get the economy going. The only thing missing is confidence.” Read more: Economic Forecaster of the Month expects ‘mediocre growth.’

That’s an understatement. The global economy is being “held hostage” by some widely telegraphed uncertainties, Baumohl said. These include the threatened “fiscal cliff” of U.S. spending cuts and tax increases, November’s U.S. presidential election, slowing demand from China, and the potential for military conflict in the Middle East.

Faced with such wild cards, he said, companies are reluctant to hire more workers even if they have a need.

And while he understands these worries are rooted in the current reality, Baumohl isn’t basing investment strategies on them.

Instead, he said, investors ought to be looking past the gloomy unemployment figures and uninspired growth statistics.

The U.S. elections on Nov. 6. will be a turning point, no matter who wins, Baumohl said. “The decision-making process on capital spending and hiring will improve,” he said, “and with that the economy too.”

So for all of you perched on the edge of the fiscal cliff, it’s safe to come down, Baumohl claimed.

“We do not believe there is going to be a fiscal-cliff fall,” he said. “It’s not going to happen. The reason is that when push comes to shove — as we get closer to the end of the year — no politician wants to have blood on their hands for triggering another recession in the economy because they couldn’t agree.”

Congressional cooperation, if only to avoid the fiscal cliff, would nonetheless give the financial community a sense that Washington is addressing the budget deficit, Baumohl said.

“That perception,” he said, “is going to lead to an improvement among consumers and businesses and set the stage for a more bullish stock market and possibly a more bearish fixed-income market.” Read more: Fiscal-cliff tax hike won't kill dividend income.