Breakout

Stocks Set to Slingshot Higher Ahead of Debt Ceiling Debates

Breakout

According to Knight Capital managing director Peter Kenny, concerns over Q4 earnings are wildly overdone. Not only that, he sees stocks moving up to 5% higher from here until the next round of debt ceiling debates start kicking in next month.

Related: Spoiler Alert -Q4 Earnings Estimates Are Too High

Kenny says Q4 earnings will not be as "ugly as many people are projecting." Given that some of those people are corporate CEOs, the burden of proof for supporting this statement falls to Kenny. His bullish thesis stems from the following:

  • The U.S. hit an earnings trough in the middle or back end of 2012
  • GDP estimates for 2013 are strong
  • There's still money on the sidelines waiting to be poured into stocks either on dips or to chase stocks higher if that dip never happens

Kenny cautions investors against getting too wrapped up in what's happening in DC. "What happens in Washington does not necessarily translate into what happens in the markets," he states. Our elected officials generate fear but the markets "operate on their own metric."

Add it up and Kenny is looking for what he calls a "sling-shot" move higher in stocks, driven by fundamentals. Housing is improving, employment is getting better and the economy simply isn't as bad as the buffoons in DC would lead you to believe.

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