Markets held gains on Tuesday after reports showed US home prices stabilized and consumer confidence improved. What should investors expect in 2010 and how should they be positioned? Tobias Levkovich, chief U.S. equity strategist at Citigroup, shared his strategies.
“Earning are the key drivers…and industrial production tends to have the highest correlation with earnings trends. And in that sense, industrial production is moving higher and is likely to move meaningfully higher based on lead indicators,” Levkovich told CNBC.
Levkovich said he expects a 16 percent increase in earnings over the course of the coming year.
“The first quarter is where you’re looking at the 30 to 40 percent increases and that kind of momentum is what carries markets higher, but after that, we start running into more challenging type of markets,” he said.
The S&P/Case-Shiller report showed home prices were flat in October, but it was still viewed as an encouraging sign that the housing market is stabilizing. However, Levkovich said home prices are not the determinant of most things.
“We look at the data on stock markets more importantly, because the top 20 percent of U.S. consumers who own roughly 90 percent of all stocks—these are the highest income earners in the country—tend to be about 40 percent of consumer spending in total and about 50 percent of discretionary spending," said Levkovich.
"So they concentrate much more on their portfolios than their home prices.”
Levkovich Likes:
Capital Goods
Energy
Consumer Services
Levkovich Avoids:
Semiconductors
Pharmaceuticals
Government Bonds
- Watch Levkovich's Previous CNBC Appearance (Nov. 17, 2009)
More Market Intelligence:
- Stocks, Dollar, Buffett: Kass' 20 Predictions for 2010
- Market to Rise 10% in First Half of 2010: Strategist
- Market Has 'Good Legroom' Going Into 2010: Chief Investor
CNBC Data Pages:
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CNBC Slideshows:
- Cramer's 12 Recovery Stocks
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Top Energy Firms:
ExxonMobil
Chevron
Constellation Energy
Duke Energy
American Electric Power
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Disclosures:
No immediate information was available for Levkovich or his firm.
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