Equities: S&P 600 via 1100?
publication date: Jan 6, 2009
Back on December 7th I noted that 'the probability of a very dramatic rally in equity markets of 20% in coming weeks is high and rising, taking the Dow over 10,000 again' and I stand by that view, implying up to 1100 on the S&P. The mountain of cash on the investment sidelines (about $8.8trn) earning a minimal return in Treasuries and money market funds as the Fed cudgels conservative, prudent savers and marches them up the risk curve, will get redeployed over coming weeks as confidence in the rally and recovery momentum grows. I also suggested that long term energy exposure was attractive, as the oil price had undershot to the downside unsustainably, and that view is now being vindicated by strong sector performance. However, make no mistake, this bear rally which will run maybe 33-40% from the November lows will be a wonderful opportunity to raise cash or hedge exposure before a new panic arises by late Spring or early Summer.
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