Thursday, August 21, 2014

Equities: Big Bear Turns Bullish (20% gain in 90 days?)

Alternate title: Slow Motion Capitulation.
From MoneyBeat:
Morning MoneyBeat: Another Bear Bites the Dust  
One of Wall Street’s biggest bears just reversed course on his views about the stock market.
Stifel Nicolaus stocks strategist Barry Bannister, who had been among the most pessimistic prognosticators on the Street, threw in the towel this week on his bearish forecast. He lifted his S&P 500 year-end price target to 2300—the highest among prominent strategists–from 1850, which had been tied for the lowest, according to research firm Birinyi Associates.

That means he expects the S&P 500 to rally another 16% from Tuesday’s close of 1981.60. It is already up 7.2% this year.

In a chat with MoneyBeat, Mr. Bannister said the five-year bull market has one final push higher left in it before the rally runs out of steam. As long as the Federal Reserve maintains its “lower for longer” monetary policies, there’s little reason why the market won’t continue rallying throughout the rest of the year and through 2015, he said.

After that, watch out.

“This is probably a finale for the market,” Mr. Bannister, a managing director at Stifel, told MoneyBeat. “This will be the big move that usually accompanies the end of bull markets…We’ll worry about 2016 when it comes.”...

And via MarketBeat's Dow Jones confrères at Barron's Stocks to Watch:

Can the S&P 500 Gain 20% in 90 Days?
Stifel’s Barry Bannister and Jesse Cantor just went from bearish to bullish on the S&P 500 in their most recent report. Where they once thought the S&P 500 would finish at 1,850–6.2% lower than yesterday’s close–they now think it will finish 2014 at 2,300, a whopping 17% higher.

Bannister and Cantor explain their about face:
The three Secular Bull markets over 6 years long, roughly the 1920s, 1950s and 1990s, all coalesced at this exact point before moving higher , and while this bull market hasn’t joined the 6-year “Secular” club (that occurs March 2015) stocks do appear to be consolidating as is normal at this point (Summer 2014) before potentially moving higher. We label the three stages of Secular Bull markets by the investor archetype whose enthusiasm we believe rises at each point, calling them the “Intrepid,” “Mainstream” and “Straggler” stages. As Stragglers arrive, much like 1987 and 1999, price history supports 90-day trading day upside of +20% for the S&P 500, in our view....MORE