Jeff Saut’s Best Ways to Play a Market Continuing to Run
Shellady thinks the stock market could rise 15% in the coming year because Janet Yellen could provide further accommodation, “put her foot on the gas pedal,” because the economic numbers haven’t been great.
Saut agreed with Shellady’s assessment saying bottom up earnings estimates on the S&P 500 will be up about 13%, with the market tracking that number to the upside.
Maxson put a damper on the enthusiasm by stating the surprising growth in GDP last quarter was due to an inventory build-up. “It remains to be seen whether the economy can absorb higher rates and I think we’ll see GDP come down in the next quarter, but I don’t think we’ll have a negative year in the market,” he added.
Further comments were made regarding the data-dependency of the Yellen Fed.
Saut reminisced back to the market of the 1950’s, the last time a secular bull market in bonds ended, when interest rates were low (around 2% on the 30 year) for a long period and started to rise (eventually to 4.5%) along with the Dow climbing from 173 to 730. “Interest rates were going up for the right reason…the economy was getting stronger,” according to Saut.
Maxson expects the homebuilders to have a strong spring.
Saut touted a couple of tower companies or “real estate in the sky.” American Tower (AMT) and SBA Communications (SBAC) were mentioned and companies Saut had rated as “buys” back in September [link]. The requirement for mobile device bandwidth will continue in Saut’s view; a “non-stoppable trend.”
Saut expects the big financial firms to spin-off divisions to create shareholder value.