Garzarelli said her fundamental indicators, which include monetary indicators, economic cycle sentiment, and valuation, range from zero to 100 percent and were currently at 80 percent. Garzarelli added that anything below 30 percent would suggest a major bear market, while below 43 percent the indicators would forecast a 10-15 percent correction.
Garzarelli stated that the reading of 80 percent was very, very bullish.
The interviewer, Tom Hudson, questioned Garzarelli about the headline risk including governments getting their credit ratings cut overseas.
Garzarelli said she thought the overseas risks were discounted, and that most of the countries should be BB already, so it wouldn’t have much impact on the market.
Garzarelli sees two percent GDP growth this year, followed by 2.5 percent next year. She believes the strongest sectors will be residential construction, equipment spending, technology, computer software, and manufacturing structures.
Garzarelli likes the Russell 2000 ETF (IWM) because it doesn’t have much exposure to Europe and they were the worst performers last year losing close to seven percent. She added the Russell 2000 is largely made up of basic materials, industrials, and consumer durables.
Garzarelli also like the SPDR Technology ETF (XLK) and anticipates tech stocks could do twice as well as the S&P 500. She said the index includes IBM, Microsoft, Apple, Google, Intel and Cisco.
Garzarelli commented further on what she likes; SPDR Industrials ETF (XLI), and SPDR Barclays High Yield Bond ETF (JNK), and the reasons why. Hudson re-capped the performance of Garzarelli’s picks during her last visit in April 2011 (SPDR Materials Select Sector - XLB, SPDR Select Financials – XLF, SPDR Select Energy - XLE, and closed-end fund Wells Fargo Advantage Income Opportunity - EAD). Garzarelli commented that she still loves them all. She added she owns all of the picks she mentioned.