The first half of 2012 has been a weird, harrowing ride. One of the best first quarters in recent memory was all but wiped by the middle of June. With stocks up a respectable, if not scintillating mid-single digits, investors have an opportunity to decide whether or not it's even worth taking part in what's certain to be a bumpy second half.
Paul Schatz says the first 6 months had a few unique twists but the price action has been fairly typical for an election year. The CIO of Heritage Capital LLC believes the next few months will settle into a less volatile range, leaving those expecting another seasonal stock bash disappointed.
"Early June lows should be the lows for a while," Schatz offers. "Stocks already had the summer decline we saw in '11 and '12."
His temperate views seem almost reckless in this world of daily economic down-ticks and, of course, the curiously perpetual nature of the European meltdown. The tired drumbeat of negatives are a selling point to Schatz. When seemingly everyone is focused on the same thing it's traditionally a time to buy, not sell.
Europe is going to get its act together because the alternative is death and calamity. Leaders of the respective countries may be acting daft but the survival instinct remains strong. They'll take their "sweet time" about doing anything but will manage to stave off total meltdown for another decade. Buying European stocks is lunacy but expecting the EU to drag the world into the abyss is equally silly.
Schatz says the same basic idea applies to American lawmakers and the latest in a growing list of fiscal calamities created, and eventually solved by DC.
"When push comes to shove the lame duck Congress comes in, they make the middle class tax cuts permanent, they extend the upper-class tax cuts for another 6, 12, 18 months, and let the next group worry about it," he predicts.
Where does it leave us by December 31st? AT "1,400-ish" on the S&P 500 says Schatz, giving the prediction all the rigorous thought it deserves. More seriously he's looking to keep an overweight position in biotech stocks as markets digest elections, Europe and anything else that can be thrown its way between now and the New Year.
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