Jeff Saut Sees Big Year-end Rally
The recent negativity in the market does not deconstruct the bullish case here, said Saut on CNBC’s Squawk Box.
“You’ve got massively oversold conditions in the equity markets,” Saut added.
The upcoming expiration on December stock options, worth over a trillion dollars, has everyone worried. However, Saut said this typically has a bullish tilt.
He added that stocks could reach all-time new highs by year-end. “The setup is pretty good for a rally to the upside that’s going to surprise a lot of people,” noted Saut.
Saut noted that we’re approaching the popular “Santa Claus rally,” the period between Christmas and New Year’s Eve when, historically, stocks tend to rally.
Saut stated the market wasn’t as cheap as back on August 21st when he last called for a bottom [link], but they aren’t all that expensive now, according to his analysis.
A mere days after Saut’s August call on CNBC, major stock indices their closing lows of 2015.
Saut said he made that summer swoon prediction based on a proprietary market timing model, which also signaled a top in late October. That also turned out to be correct within days. The S&P has fallen about 4 percent since then, as of Monday’s close.
Saut added his model “is calling for a rip your face off rally right here.”
Saut believes the stock market can weather a rate hike by the Fed. Fed Chair Janet Yellen is a “gradualist,” he noted. “I think she does raise rates. I think she then steps back two, three, four or five months to see the impact on the economy, on the financial markets; on the real estate market before she does another rate ratchet.”
Saut didn’t appear concerned about the decline in crude oil prices. He admitted being wrong on four separate bottom calls on the commodity. He said oil started a bottoming process at $42 per barrel in February. Despite prices falling dramatically recently and being below $35, he doesn’t see another major leg down in the texas tea.