The market is bouncing back today, poised to snap a five-day losing streak. Regardless, Doug Cote, chief market strategist at ING Investment Management, doesn't care about today's strength or April's weakness: if the U.S. stock market is open it's a good time to buy equities. He's not a wild-eyed perma-bull or hopeless optimist in general. Cote simply likes what he sees and he has a rebuttal for the litany of conventional bearish themes:
Corporate profits are flat-lining
Estimates for earnings growth in Q1 are somewhere around or below 1%. If those forecasts are accurate it will be the slowest quarter since 2009.
Cote says profit growth only seems weak by comparison. "2011 was actually the highest level of corporate profits ever for the S&P500," he says in the attached video. What's more the analyst community underestimates growth on a regular basis. This time Cote thinks they're collectively erring on the side of pessimism.
Unemployment translates into a weak consumer
Cote couldn't disagree more. "The consumer is a game changer," he says. The strategist insists that last Christmas season was "fantastic" regardless of what you hear in the media, and that trend has largely continued based on sales data from the best-of-breed retailers.
As for unemployment, Cote thinks the reaction to last Friday's release of the March jobs data, specifically the non-farm payrolls number has been way overdone. Not only that, he says the emphasis on NFP is misplaced.
"Look at initial unemployment gain," Cote says. "Don't look at the headline, look at the positive revisions (of prior months)."
Bonds are the new stocks for individual investors
"There's $7.5 trillion dollars on the sidelines," says Cote, a huge chunk of which is heading into bonds.
With bond yields stuck near record lows and high yield junk offering a measly 8% return, investors will eventually find better opportunities in equities. A diversified portfolio of stocks returned 7.5% in the first quarter alone, he notes.
Treasuries lose to inflation and the risks of junk bonds aren't much better than the dangers of owning stock. When mom, pop and junior start putting even a fraction of that $7.5 trillion into equities the laws of supply and demand will force prices higher.
Without sounding too cliche, he adds that Sell in May simply won't work this year. Cote insists "the fundamentals keep marching forward while the global risks have abated."
If he's right, U.S. stocks are compelling regardless of what the tape is doing at any given moment.