After snapping a nine-week rally, many investors are left wondering if they got ahead of themselves.
One strategist has some words of wisdom: “Focus on the pony.”
It’s human nature to second-guess yourself when you go that far, that fast, Al Goldman, chief market strategist at Wells Fargo, wrote in his weekly commentary, but cautions investors not to lose sight of the buying opportunity in front of them.
“The current mood reminds us of the optimistic 10-year-old who, to test his optimism, was given a bag of horse manure for Christmas. Last seen, he had a big smile on his face as he ran around looking for his pony,” Goldman wrote, citing the same joke this blog is named after. “We believe there is more good news (ponies) to come,” he said.
Goldman and his team believe it’s probably a safe assumption that the economy will “be doing moderately better” by year end, citing the following reasons:
- Larry Summers said the economy is no longer in freefall
- The NY Fed’s manufacturing reading was the best in nine months
- Industrial production dropped just 0.5 percent in April
- Consumer sentiment has improved significantly
“Because we believe the economic outlook is improving and the supply/demand ratio for stocks is bullish, we advise using this pullback as a buying opportunity,” Goldman wrote.
He advises select buying in quality growth companies. In terms of sectors, he likes technology, oil services, pharmaceuticals and retail — particularly the discount department stores as consumers are likely to continue being frugal even after the economy recovers.
“The economic data is slowly going to start to improve … and [will] end up being modestly positive by year end,” Goldman said. “And, believe it or not, people are going to realize that this great nation of ours is going to survive and prosper,” he explained.
“Like the optimistic 10-year-old, we advise believing that a pony is out there,” Goldman said, but “be careful where you step.”
Now in 'Doom' Flavor! Not ready to be quite this rosy? Still got a little doom and gloom tucked between the cushions of your sofa? Here's a slideshow of more than a dozen downersand their scary views, compliments of Joe Weisenthal over at the Business Insider.
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