Elaine Garzarelli: Stock Market 10 Percent Undervalued
In a recent article at The Economic Voice, famous market prognosticator Elaine Garzarelli, President of Garzarelli Capital, Inc., is quoted as being quite bullish on the prospects for the stock market.
“If you have any cash, get into the market now,” investment advisor Elaine Garzarelli, President of Garzarelli Capital, Inc. said yesterday “The stock market is 10% undervalued; there is no bubble in stocks.“
In fact, Garzarelli considers the market undervalued and scoffs at the idea of a bubble in stocks:
“The economy is slowly chugging along. We have earnings estimates at 111 for the S&P 500 for next year. That’s 10% below the consensus. And the model we have for the price to earnings ratio, put on those earnings, is 17.5 times earnings, at current interest rates. So the stock market is 10% undervalued. I don’t know where anybody gets the idea that we’re in a bubble.”
Garzarelli commented on importance of the relationship between short-term and long-term interest rates:
“…you don’t come down and have a bear market until the Fed tightens and we get an inverted yield curve, which means short-term rates are above long-term rates, and currently, short-term rates are close to zero. And long-term rates are 2.7%. So the Fed would not only have to taper, they would have to raise interest rates by 25 basis points every meeting, which means you’re talking about two years from now before we can even have a problem with a bubble.”
She proceeded to comment on her indicators which are bullish and the limited impact of any potential market corrections:
“Our indicators say we could have a correction in the stock market, but it would be limited to 4-7% because our overall indicators suggest a bull market. They’re not at 30% which suggests a bear market, or 42%, which suggests a correction of 10-15%. Instead, our indicators are at 76.5%, down from 82%. So because they have declined, we could have a little correction, maybe 4-7% but nothing more than that. And, I don’t even think that will happen.“
Back in January, as a guest on The Nightly Business Report, Garzarelli expressed bullishness for 2013 and discussed the sectors which would outperform [link].
Source: The Economic Voice