Knapp Drops Bearish Call, Sees 2009 Rally (Go Bullish?)
Should we really go Bull or stay Bear (Barry)?
Barclays’s Knapp Drops Bearish Call, Sees 2009 Rally (Update1)
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By Jeff Kearns and Elizabeth Stanton
July 14 (Bloomberg) -- Barry Knapp, previously Wall Street’s most bearish stock strategist, now says the Standard & Poor’s 500 Index may eke out a 3 percent gain in 2009 as industrial production recovers and credit markets improve.
Knapp, the head of U.S. equity strategy at Barclays Plc in New York, raised his S&P 500 target to 930 from 757, citing forecasts for a rebound in U.S. growth. Economists estimate gross domestic product will expand 0.95 percent in the third quarter and 1.9 percent in the fourth after contracting in five out of the preceding seven quarters, according to data compiled by Bloomberg.
Rallies such as the 33 percent advance in the S&P 500 over the last four months tend to continue after a “correction” of about 10 percent, Knapp wrote in a note to clients. The 47-year- old analyst said he failed to foresee the size of the gain since the index fell to a 12-year low on March 9 of 676.53.
“The magnitude of the advance took us by surprise -- it was double what we were expecting in half the time,” Knapp wrote. “History suggests you get a 5 percent to 10 percent correction after the initial advance before witnessing another push higher.”
Previously, Knapp said slumping profits at banks and companies that depend on consumer spending would push the gauge down 17 percent this year. He said valuations were too high relative to sales, with the S&P 500 trading at 0.92 times annual revenue, compared with a low of 0.34 times in 1982, according to his data.