Exclusive: BMO Isn't Sweating China

Major U.S. markets bounced back on Wednesday, as the S&P 500 erased nearly 73 points of its recent pullback. However, since China is at the center of all of this market volatility, the fact that China’s Shanghai Index fell for the fifth consecutive day and is down 22 percent during that span has global investors worried about whether or not the worst is yet to come for U.S. markets.

One firm that isn't fretting the market pullback is BMO Global Asset Management.

Benzinga recently had a chance to speak to Brent Schutte, Senior Investment Strategist for BMO, about where he sees U.S. and Chinese markets headed over the next 12 months, what warning signs traders should be watching for in coming weeks and if BMO has been buying this dip.

Where Are We Headed From Here?

Despite the fears in U.S. markets, BMO retains its bullish 12-36 month outlook for the S&P 500. Schutte told Benzinga that the outlook for China is not as clear.

China has to liberalize their economy and make it less opaque to win investors who are willing to buy and hold for the long term, he explained.

“That does not mean there will not be opportunities within individual Chinese equities and during shorter time periods, but for now we retain a more optimistic long-term outlook on the U.S.”

Related Link: Apple's Latest China Problem: Market Share

What To Watch For

When Benzinga asked what could change Schutte’s optimistic outlook for U.S. markets, he indicated that BMO’s focus is squarely on the economic numbers coming from this side of the Pacific Ocean.

He believes that the market volatility and the long-term strength in U.S. equities will be closely tied to the health of the U.S. economy and major U.S. policy decisions such as interest rate changes.

“Given that our premise is based upon a continued strengthening of the U.S. (and developed market) economy, if the data would begin to weaken in aggregate, we would likely change our outlook on the severity of the downturn,” Schutte told Benzinga.

Buying Opportunity?

Since BMO is maintaining its long-term bullish stance on U.S. equity markets, Benzinga asked Schutte if the firm has taken advantage of the market pullback to scoop up discounted stocks. He explained that the firm has mostly maintained its positioning. “In other words, we have not reacted to the market."

BMO remains slightly overweight equities with a bias toward International Developed Stocks.