Jeff Saut, chief investment strategist at Raymond James, has been correctly bullish in the darkest of times over the last few years; including the period immediately prior to the elections of 2012 when others were saying the then three-year old rally was getting long in the tooth. Given that track record it's worth paying attention when Saut changes his tune, especially when he's talking about Washington DC's impact on the markets.
In the attached clip Saut says U.S. investors are about to get reminded of just how inept our elected officials can be. "I think we're going to hear some saber rattling, things about sequestration is going to start to bite some things about continuing resolutions before Congress adjourns in August," he says. "So after being very constructive on equities I've pulled in my horns a bit here."
Think of it as more of a tempered outlook rather than Saut giving up on stocks entirely. He still believes stocks will eclipse the all-time highs of 1,687 on the S&P 500 (^GSPC), but also expects a more than 10% correction between now and then.
Saut believes the institutions and individuals have been underexposed to stocks during the rally of the last four years and remain on the sidelines now. That puts a bid under the tape on pullbacks once the politicians get out of the market's way. Another bullish factor that Saut keeps trying to explain to investors is that the stock market isn't necessarily driven by robust growth as long as the trend is their friend.
"Equity markets don't care about the absolutes of good or bad," Saut explains. "What the equity markets care about is 'are things getting better or are things getting worse?' And I think things are getting better."
Something to keep in mind for Labor Day, about the time at which Saut thinks any selling will have run its course.
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