Equity markets are historically known to be discounting
mechanisms for what lies ahead.
In February 2013, fifteen Wall Street sell-side strategists
forecast S&P 500 returns for 2013 of between -2.5% and +13.2%
Quite a range!
- Three sell-side strategists were
and looked for -2.5% to +0.5% returns
sell-side strategists looked for around +10% annual
At the top of the sell-side pack, "The Raging
The Raging Bulls note the energy sector's North
American expansion, a renewal in U.S. manufacturing
competitiveness, the explosive penetration of IT mobility,
and an ongoing housing and construction rebound. Combine this
with some positive demographic shifts for baby boom echo
savers and more fiscally responsible behavior out of
politicians. A surprise could come from changes in the U.S.
corporate tax code to encourage companies to invest.
Below the "Raging Bulls" are "The Analytical Bulls"
These bulls believe the current level of macro surprises is
consistent with significant stronger markets. Current GDP growth
rates have historically been consistent with stock returns around
Prospects remain good for economic growth to reassert itself.
Challenges are persistently met by concerted efforts of country
officials and central bankers around the world. They are
aided and abetted by secular trends larger than the cyclical
hurdles in the immediate path. The process of fostering a fuller
recovery from the grips of a five-year's gone global financial
crisis will persist and ultimately prove successful.
What is the fundamental concern? Negative earnings
The cautious stances are predicated upon belief in a number of
macro uncertainties - the most important of which stem from
long-term U.S. fiscal imbalances. These hamper earnings
growth and constrain valuations in 2013. The U.S. government may
push off its most important structural issues into the future,
leaving significant uncertainty about the long-term direction of
the economy and corporate profits.
The bear's core argument falls this way...
We are entering the fifth year after the "The Great
Contraction". Considerable progress has been made in
deleveraging financial and household sectors. However, the
most complex stage - stabilizing public sector debt - remains a
Indeed, significant competitive advantages could begin to
accrue to the U.S. economy in the years to come from energy,
manufacturing competitiveness, and demographics.
But the savings required to fund this private investment could
be redirected to the public sector - if policymakers do not slow
the growth of mandatory spending.
Do YOU Side with the Bulls or the Bears?
Take part in this survey, so we can find out how the Zacks
community breaks down.
I will tabulate the results at the end of the weekend.
Here are the choices:
(A) I'm a Raging Bull. Nothing can stop the U.S. economy.
Innovators propel us.
(B) I'm an Analytical Bull. Numbers say +10% returns this
(C) Neutral. Range-bound markets from here on.
(D) Modest Bear. Government dysfuncition is about to
bite. But not by as much as the cynics think.
(E) Full-on Bear. Yeah right. Five years of DC
dumbness come home to roost this year.
I look forward to seeing how you explain the choice you
GREAT WEEKEND to you all.
SPDR-DJ IND AVG (DIA): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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