“We are up 50 percent from the lows for the stock market—but from the beginning of last year, we’re still down 25 percent and over the last decade, we’re still down 10 percent."
"So I don’t think just because we’ve had a fast and furious rally, it’s necessarily too much too soon,” he said.
Knight said the earnings surprise so far has come mostly from cost-cutting so there is now some scope for the topline to drive growth.
However, he said he is underweightthe energy sector, as the rally has been dramatic among lower quality and aggressive areas.
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“I’m a little troubled by the fact that earnings surprises have been the lowest in energy among all the sectors and earnings growth has been the lowest in the energy sector, and so I wonder if the optimism has outrun the reality of the short term with energy,” he said.
Patel agreed that the equities over the next 12 months are going to be up in "comfortably double-digit rates of return."
“The surprises are all going to be on the upside for growth and corporate profits and that’s going to be keeping the markets going higher,” she said.
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Additionally, Patel said the consumer does not have to come back to revive the economy.
“In the cyclicals, in the energy, materials, even in industrials, companies that are able to feed into much higher growth overseas and the U.S. growth are going to surprise and be a lot stronger than what people think,” she said.
“So we don’t need the consumer for the next couple of quarters—the rest of the world will do quite well for us.”
Patel said she is overweight on the oil sector. And she also likes the energy services.
“It’s true they should have down profits for the next year, but long-term, they have the tools and technology that we all need,” she said of the energy services. “Energy materials and the economically sensitive sectors are going to particularly well over the next year.”
More on Energy/Oil:
No immediate information was available for Knight or Patel.
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