With the first 3 quarters in the books, 2012 has been much stronger than expected for U.S. equity markets. Despite a soft finish, the S&P500 is up more than 14% YTD and the Dow Jones Industrial Average clocking in with slightly less than a 10% gain.
It's been a good nine months but there's still 3 months left in quarter. Todd Schoenberger from the BlackBay Group joined Breakout to discuss his outlook for the end of the year. Having lost a $1 bull/bear wager last May Schoenberger settled the bet and got to make the opening argument for which way stocks are headed between now and New Years Eve.
"Bull! I'm gonna be a big bull," says Schoenberger, not wasting a minute. "You should be long, strong, equities and maybe use leverage where appropriate." It's all about the Fed as he sees it. Nothing Bernanke and Co. can do will fix what ails the economy but it doesn't really have to. $40 billion a month in MBS purchases and the vow to do more as needed will be enough to get the markets to look past the nearly endless list of obstacles for stock prices.
No matter what happens, "the Fed is there to save the day."
Schoenberger only has two real concerns for the next 10 weeks. The first is the familiar Fiscal Cliff. No one's thinking much about it now but it's "out there" and could become a more acute concern in the likely event that no progress is made by politicians before the new year.
The other rally stopper would be Mitt Romney winning the Presidential election. While a long shot according to the polls, there's still more than a month before the election. If Romney wins, he's said he'll get rid of Bernanke in January 2014 when the Fed Chairman's term ends. A new Fed head would have to be tighter on monetary policy, if only because it would be impossible to be looser.
Barring those two factors Schoenberger sees no reason to hedge his bet. "Your viewers right now want to know how they're going to make money," he correctly notes. He thinks viewers should ride consumer discretionary and growth names into the end of the year when he says the S&P500 will be 1,550.
It's in the book: Todd Schoenberger sees the S&P500 rallying another 7% in Q4 to close 2012 at 1,550. For what it may be worth I'm bullish, only less so. I'm taking the under.