Stocks enjoyed a big gain on Thursday on a stronger-than-expected GDP report. But will it be enough to kick-start another sustained rally? Andrew Kanaly, chairman of Kanaly Trust Company and Paul Schatz, president of Heritage Capital discussed their outlooks.
“[By] GDP data alone, absolutely not,” Schatz told CNBC. “We all know [the GDP gain] was baked in with free money and government money and not 'real money.'”
Schatz said the markets are in the middle of a correction, which will wrap up during Thanksgiving or in early December before riding another rally into next year.
“But it’s not based on GDP,” he said. “[The correction] will be the largest decline since the bull run began in March—somewhere between 7 to 17 percent total from the peak, but then we’re going to see new highs again during the first quarter of 2010.”
Schatz said he doesn’t see the Federal Reserve making any movements in the foreseeable future.
“Very slowly, they’re going to start putting the hints out—the economy’s getting better—which I don’t believe, but that will add strength to the dollar,” he said.
But, Schatz added, “If the Fed is going to keep the pedal down and flooding the system with cash, stocks are going to go up—the Dow is going to go far above 10,500—11,000 in the first and second quarters next year.”
In the meantime, Kanaly told investors that the economy’s “seen the best of the GDP news for a while.”
“It looks like everything’s going to slow down from this furious pace we saw in the third quarter—the dollar’s strong and everything else is weak—I’m not sure your stock market is going to like that very much,” he said.
Kanaly said he is keeping his bond holdings “very short-term.”
“We have been buyers of gold, but now we’re concerned that it’s gone too far too fast because it’s not inflation-driven, it’s a currency play. At some point, that’s going to go away,” he said.
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No immediate information was available for Kanaly or Schatz.