Despite three months of economic and corporate data, clarity on health care legislation and the S&P 500’s steady climb to an 18-month high, the outlook for the rest of 2010 is no clearer than when the first quarter began, according to many investors, traders and strategists.
A survey given to institutional investors at a Strategas Research Partners conference last week featured guesses for the S&P 500’s level 12 months from now that ranged from 1400 to 900. The range of predictions for the 10-year yield was between 6.5 percent and 2.5 percent. The crowd thought gold could be anywhere from $800 to $1800.
“It reflects this tension between the cyclical forces that are bullish for the economy and the secular forces such as deficits, interest rates and taxes that are bearish,” said Jason Trennert, founder of Strategas and among the most respected chief investment strategists on Wall Street.
Trennert believes the market could surge higher during 2010, but then end the year essentially where it is now. “We’re bullish until the bill comes due in the form of higher taxes and higher rates.”
The S&P 500 traded higher around 1170 today after investors finally received some clarity on how the government would unwind its giant stake in Citigroup, one of the outstanding questions hanging over many market outlooks. The average of the year-end S&P 500 forecasts from investors attending the Strategas conference was 1189.
Trennert’s roller coaster forecast is not uncommon among strategists. “We believe gains in 2010 are likely to be uneven and the S&P 500 could spike above 1,200 during earlier parts of the year and then back off,” wrote Tobias Levkovich, Citigroup’s chief U.S. equity strategist, in a note to clients Friday. A recovery in earnings and stabilized employment market “should bolster equities initially, especially if money flows begin to chase returns as has often been the case in the past.”
But if that individual investor doesn’t want to pay their broker for just a fun ride to nowhere, they better start becoming stock pickers, according to Oppenheimer’s Brian Belski.
“Passive investors are at a disadvantage when stock correlations decline,” wrote the chief investment strategist in a note today entitled “Strategies for a Stock Pickers’ Market.” Belski recommended looking for value stocks based on price to cash flow, enterprise value to cash flow and price to long-term growth estimates.
Bank of America, JPMorgan Chase, Travelers, Goldman Sachs and Diamond Offshore Drilling where among the stocks that appeared attractive based on Belski’s screens, as well as the opinion of individual Oppenheimer analysts that cover the stocks.
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Trader disclosure: On March 29th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (YUM) Calls; Najarian Owns (CAT) Calls; Najarian Owns (WFR) Calls; Najarian Owns (TIE) Calls; Nations Owns (SPY); Scaramucci Owns (AAPL); Scaramucci And Skybridge Own (BAC); Scaramucci And Skybridge Own (C); Scaramucci Owns (MS); Scaramucci Owns (MSFT); Scaramucci Is Long U.S. Dollar; Najarian Owns (CLF) Call Spread; Najarian Owns (F) Calls; Najarian Owns (RDC) Calls; Najarian Owns (RRC) Call Spread; Najarian Owns (SWN) Call Spread; Najarian Owns (YHOO) Calls; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leap; Finerman Owns (BAC); Finerman's Firm And Finemran Own (GGP); Finerman Owns (GOOG); Finerman's Firm Owns (IBM), (MCD), (PDE), (RIG); Finerman's Firm And Finerman Own (WFC) Preferred; Terranova Is Short (GS), (CAL), (UAUA); Terranova Is Long Crude Oil Futures (May 2010); Terranova Works For (VRTS)
For Joe Terranova
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
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Kanundrum Capital Owns (SYY)
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Kanundrum Capital Is Long U.S. Dollar
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For Greg Badishkanian
Citigroup Global Markets Or Affiliates Has Managed Or Co-Managed Offering For (MCD), (YUM) In Past 12 Months
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Citigroup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (MCD), (DPZ), (YUM), (BKC) In Past 12 Months
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