Jeff Saut Believes the Stock Market Breakout is for Real
Long-time chief investment strategist Jeff Saut of Raymond James was a guest on Fox Business and provided his investment outlook. He said equities which aren’t correlated to the market are attractive and his analyst has an outperform rating on Johnson and Johnson (JNJ) and Rayonier (RYN). Saut added that while the market has been digesting its gains from October 2011 through May 2012, these are the kind of stocks that are working.
Saut pointed out the market broke out of the top of its range (S&P 500 level of 1360 to 1370) a few weeks ago. Saut believes the breakout is for real and may stall here and pull back, but the market will eventually move higher.
When asked why investors were putting money into bond funds, Saut replied they are always fighting the last war. Back when the market bottomed in 1982 there were net redemptions from domestic equity mutual funds for the next 10 years, according to Saut. Everybody is looking at the “worry du jour” and if the market is a discounting mechanism it has discounted the dysfunctionality of our government, the slowing economy, the “Euro-quake,” and the Chinese slowdown said Saut. The economy looks like its starting to re-accelerate, Saut added.
Saut said he’s been in the business for 42 years and you can’t convince investors to get back in the market because it’s fear, hope and greed only loosely connected to the business cycle.
Saut said valuations are attractive, companies have a lot of cash on their balance sheets, and there is a lot of cash on the sidelines. When it becomes apparent we are repeating the past two years and there is no recession in the fall you’ll see a switch from fixed income into stocks, he said.
Saut mentioned several recent economic reports that have come in positive and said the recent rotation into energy, materials and technology was the most significant event in the market last week.