Abby Joseph Cohen, Goldman Sachs

  • Abby Joseph Cohen stood out for her precise understanding of the economic boom of the 1990s.
  • Cohen told Insider that the current recovery is expected to continue despite high inflation.
  • She told Insider where she sees opportunities in an ongoing US economic expansion.

Individuals rarely get credit for moving the stock market, especially if they are not presidents or Fed chairs. Abby Joseph Cohen is a member of this exclusive club.

If stock market history remembers the 1990s as a long and remarkable


bull market

, investors at the time doubted its duration. Cohen, Goldman Sachs’ chief investment strategist, said the economic expansion could continue – and it did, from March 1991 to March 2001.

She gained a reputation for being consistently optimistic, and when she told investors to recall their stock allocations in March 2000, about two weeks after the Nasdaq peaked in the dot-com boom, it led to noticeable weakness in the market.

The Wall Street Journal called it the “Abby Effect.” Jim Cramer, hedge fund manager and “Mad Money” host, suggested his remarks were carefully timed so as not to provoke an even bigger clearance sale — such was his reputation at the time. Cohen continued to make accurate market calls over the next few years, but was called a “permabull” when she hadn’t foreseen the global financial crisis and the great crisis that followed.


Recession

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Cohen stepped down as chief investment strategist in 2008, but remained at Goldman in an executive role. She retired from the firm at the end of 2021 and now teaches full-time at Columbia University Business School. And while she says it’s impossible to predict another decade-long expansion at this point, she says investors are more concerned about the fate of the economy than they should be.

“The US economy is doing much better than a lot of people believe,” she told Insider last week, ahead of Russia’s invasion of Ukraine. “I think the concern about inflation is overblown, and I think the concern about interest rates is incredibly premature.”

Cohen says that much of the Inflation rate at its highest for 40 years are driven by items like cars and furniture that people don’t buy over and over again, and another big thing, raising the wages of the lowest-paid workers, is ultimately good for the economy.

While interest rates are expected to rise significantly, she says, they will do so from very low levels, and it’s too early for investors to conclude that rising rates will hurt the economy.

Meanwhile, she says growth in the U.S. is picking up a bit, with the Infrastructure Investment and Jobs Act a big factor as it will help rural and peri-urban areas that were lagging economically. and strengthen some struggling market sectors.

“I think sectors linked to the economic recovery are a good place to invest,” she said. “That would include commodities. That would include things that are economically sensitive, and economically sensitive names include things like finance, retail, and consumer services.”

Investors can gain broad access to these trends by using exchange-traded funds (ETFs). An ETF like the First Trust Global Tactical Commodity Strategy Fund would provide exposure to many commodities in agriculture, metals and energy; while equity-oriented funds like the ProShares Ultra Consumer Service ETF, Fidelity MSCI Financial Services Index ETFand SPDR S&P Retail ETF provide exposure to the types of businesses Cohen favors.

Cohen says the consumer service names are particularly attractive, and the automotive sector will provide good opportunities as supply chain issues ease. She says investors in bond mutual funds should be careful, however, because they could suffer a partial loss of their main investment if another investor cashes in, which could happen if rates rise or fears over the fate of the economy increase.

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