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Get set for the big bull run

posted 25 Jan 2013, 12:34 by Mpelembe Admin   [ updated 25 Jan 2013, 12:34 ]

The stampede of headlines screams stocks.

They say equities are headed for a big bull run for the long-term - a so-called secular bull market. It sounds contrarian....

 FRED KATAYAMA, REUTERS REPORTER :

"given the U.S. faces the prospects of across-the-board spending cuts and Europehasn't pulled out of its debt mess."

But many strategists have turned ultra-bullish.

Stocks guru Jeremy Siegel at Wharton says the S&P 500 will bolt past the record high to 17-hundred for a 2013 gain of more than 19 percent, the biggest yearly increase since 2009. So does Piper Jafrray's Craig Johnson, who calls this a "generational bull market." He sees 1700 this year and 2000 by 2014. J-P Morgan chief U-S equity strategist Tom Lee, whose 2012 S&P forecast missed by just 4 points, sees 15-80, an 11 percent increase for the year.

Keep in mind: the last long-term bull market stretched from 1982 to 2000.

THOMAS LEE, CHIEF U.S. EQUITY STRATEGIST, J.P. MORGAN, 

"What'll get investors more comfortable about the bull market is the U.S. expansion is accelerating. We think that'll be led by housing, which has already strengthened for a year, and that's usually a three to five year cycle. I think the next clincher is a construction recovery, non-residential, infrastructure spend, power communications-type spending, and as that kicks in, that really helps the labor market recovery."

Among the bulls' arguments:

- The housing recovery Lee referred to will drive the economy, boosting corporate earnings and stock prices. Analysts see earnings growing nearly 10 percent this year.

- Investors have begun to pour their money into stocks. They shoveled more than 11 billion dollars into equity funds in the first two-weeks of the year. That's the biggest inflow since April 2000.

- What's more, money -coiled like a spring - could unwind and flee the low-yielding high priced bond market as investors search for higher returns and institutional investors rebalance their assets in favor of equities. Since the end of 2007, more than 400 billion dollars had flowed out of stock funds as bond funds sucked in roughly a trillion dollars. That, they say, has got to reverse.

SIMON LACK, MANAGING PARTNER, SL ADVISORS:

"Investors should have no fixed income. They should use equities and cash in a barbell strategy on their risk appetite to generate return. I think bonds are overpriced, and you should exit bonds."

So - if you're a bull market believer, where should you put your money? Strategists like Lee and Bank of America's Savita Subramanian like economically sensitive cyclical sectors like high tech and energy.

THOMAS LEE, CHIEF U.S. EQUITY STRATEGIST, J.P. MORGAN, 

"If we're thinking about the U.S. economy accelerating, we want to buy groups that have exposure over that, which is really smokestacks. In terms of potential for M&A and capital returns, it is in the cyclical group because dividend payouts are typically low, lot of cash in the business, particularly tech, and financials haven't paid dividends. So the idea of cash return occurring is really a cyclical call."

Within energy, JP Morgan likes Phillips 66, Danbury Resources, and Schlumberger. In tech: Apple , Oracle, and Texas Instruments.

Others like Siegel prefer dividend-paying stocks.

The stock market has gotten off to a jackrabbit start, sprinting up nearly 5 percent in just a few weeks. So a few strategists foresee a short-term pullback. But they're betting the bulls will grab this market by the horns.


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