When Wall Street strategists insist on hedging their forecasts using time frames it means one of two things. Usually it’s a way of sidestepping accountability and ducking into the standard sales pitch about the stock market historically returning somewhere around 9% or more on an annual basis. While mathematically true that’s neither earth shattering nor actionable.
In the case of Raymond James’ Jeff Saut his emphasis on the big picture is a polite way of avoiding the fact that stocks have been trading horribly for over a month and there’s little to suggest the near-term risk outlook is anything other than ominous.
“I think longer-term we’re in a secular bull market very much like we were from 1982 to 2000,” offers Saut in the attached video. “Not a lot of people believe that, especially not the individual investors. They don’t understand how you can have a secular bull when you have dysfunctional government, unemployment higher than what it should be at this stage of a recovery and GDP lower than what it should be.”
What don’t investors understand? Stocks don’t care about absolute levels. What matters is direction. Saut thinks the economy is improving. In the big picture everything else is noise.
In the more immediate term it’s impossible to ignore the fact that 5 years into Saut’s range of ‘82 to 2000 there was the 1987 crash. Saut isn’t looking for a repeat necessarily but the volatility of the tape suggests traders have almost no confidence in the market at this juncture. Markets put in an attractive bounce on Wednesday but those under the impression that a $7 pop in Facebook (FB), to take one example, is healthy after shares fell 20-points in a straight line need to keep in mind the wild ride isn't over yet.
For the year Saut thinks the S&P 500 (^GSPC) can post above average gains of 10-12%. For the next 3 months his forecast is for some rocking and rolling. Review your portfolio to fit your personal tolerance for pain.
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