The stock market is set for another surge higher as the Federal Reserve’s rescue packages begin to pull the economy out of the crisis, Charles Lemonides, founder & chief investment officer at ValueWorks, told CNBC.
“I think you have a very big rally right in front of you because the economic environment is going to get better based on the stimulus packages and the Fed easing,” Lemonides said.
"After you come out of calamities, like we’ve come out of, the market will tend to lose all its sellers and work its way higher over a prolonged period and I think we’re just at the very beginning stages of that,” Lemonides said.
Lemonides points out that the economy hasn’t lost any of its productive capacity in the wake of the financial crisis and can bounce back quickly.
- Watch the full interview with Charles Lemonides above.
“That productive capacity in the global economy will revert to the levels previous to that collapse and that’s going to be reflected in stock prices coming into the end of this year, first quarter of next year, where we’ll make up the 20 percent loss that we’ve had for the past 12 months,” he said.
Lemonides disagrees with the notion that the economy can’t recover while the US consumer stalls in terms of spending. He thinks that the monetary and fiscal stimulus from the Fed will lead the recovery and it’s only just starting to take effect.
“I don’t think you need the consumer to lead for at least 12 months and by that time I think he’ll be ready,” Lemonides said.
Lemonides thinks that there is a tremendous amount of investors’ cash waiting on the sidelines, which could end up chasing a stock rally higher once it begins.
Meanwhile the European economic outlook got a boost from news that the German private sector returned to growth in August, after an 11-month slide.
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