The laundry list of mega-risks piling up against stocks seems to be growing more precarious by day.
Europe's nearly three-year-old debt crisis remains a train wreck. The U.S. economy teeters on another recession as job growth slows. China's economy is slowing and some pundits see a harder landing rather than a soft one. And war with Iran over its nuclear ambitions looms in the wings.
All of the above makes for what NYU economics professor Nouriel (a.k.a. Dr. Doom) Roubini calls the "perfect storm." He recently reiterated his forecast for 2013 to be the year when economic Doomsday will hit.
What do these headwinds spell for stocks as markets set off into the second half of the year? A whole lot of nothing, according Josh Brown of Fusion Analytics; he says there's no place he'd rather place his and his clients' money than in stocks right now.
Like most investors, Brown has a few stocks that have underperformed. But on the flip side, he currently is invested in others that have performed "insanely well given the news flow," citing the SPDR S&P Biotech EFT (XBI) as one example.
Biotech is particularly immune to the scary macro headlines but more generally, the stock market does not always follow the economy, he says. "The economy and the stock market are second cousins."
To his point, U.S. markets performed fairly well in the first half of the year despite the aforementioned ongoing and worsening risks. The S&P (^GSPC) gained 7 percent, the Dow (^DJI) rose 4 percent and the Nasdaq (^IXIC) jumped a whopping 11 percent.
Brown outlined his bullish reasons for stocks Monday on his blog The Reformed Broker. Much of his optimism rests upon is the fact that "pessimism is now the base-case scenario" and the notion that "the negatives are more well known than ever."
Everyone knows "all the news is terrible" and "it could be painful for a while," Brown tells The Daily Ticker's Aaron Task in the accompanying video. It is what lies beyond the risk factors, which has him optimistic. "I think what is on the other side of that is we are going through hell so we can get back to something approaching normalcy."
Right now Brown is invested in consumer defensive stocks, energy stocks with high dividends and the healthcare sector, which he says "has been on fire."
To sum it all, he writes on his blog:
So yeah, I know how much everything sucks…. And while I have no idea where the whole market is going, I have stocks/sectors on my screen taking bad news in stride and creeping up past new year highs (BRK-B), decade highs (WMT) and all-time highs (XBI). So I'm sticking around to see what happens next.
Tell us what you think! Do you agree stocks are where it's at?