CNBC Stock Blog

Market Set For 'Powerful' Rally in First Half of 2010: Strategist

Stocks pushed higher on Tuesday, as investors weighed a big jump in home sales against weaker-than-expected economic growth. Will the gains continue into the new year? Jeffrey Kleintop, chief market strategist at LPL Financial, and Bill Smead, chief executive and chief investment officer of Smead Capital Management, weighed in. (See Smead's favored stocks, below.)

CNBC Market Edge

“We’ve been consolidating—we’re at the high end of the range, but we’re stuck here,” Kleintop told CNBC.

“[But] the bull market’s not over yet…we’re going to keep going higher. Somewhere towards the end of the first half, the market begins to give some of the gains up.”

Kleintop said he expects the stock market to rally “powerfully” in the first half of 2010. Then, it will give up about 50 percent of its gains in the latter half as the Federal Reserve hikes rates, China slows loan growth and the Fed stops buying mortgaged-backed securities.

In the first half of 2010, Kleintop believes, “We could see well into the 1,200s on the S&P 500...but we’ll end the year with just single digit [gains]—maybe somewhere around 1,200.”

In the meantime, Smead said investors should look into stocks that have been ignored for the last six years.

“We are in a transition where the energy, basic materials, commodities are going to fold up their tent and going to be quiet and boring and non-eventful,” he said.

Smead's Favored Stocks:

Home Depot

Wal-Mart Stores

Walt Disney



Bristol-Myers Squibb

Bank of New York Mellon

Wells Fargo

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Smead indirectly owns shares of HD, WMT, DIS, CMCSK, MRK, BMY, BK, WFC via owning his fund SMVLX.

No immediate information was available for Kleintop or his firm.