Michael Kantrowitz of Wolfe Trahan: All Roads Point to Higher Stock Prices This Fall
“Risk On” trade is back in force
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Show transcript of Michael Kantrowitz of Wolfe Trahan: All Roads Point to Higher Stock Prices This Fall
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-Bloomberg's Financial Conditions Index for the U.S. and Europe is at 13 month highs and back at neutral territory. Fat-tail risks in Europe have lessened. European Composite PMI has been flat or up for the past 2 months. Data has stabilized in the core cyclical sectors of Europe's economies.
-Wolfe Trahan Leading Index has been rising for a couple months and argues bear case of near-term recession is unlikely
-Next 4 to 5 months will be a fast and furious move upward in the market and in economic data. How long it will last is dependent upon how high commodity prices rise and re-exert inflationary pressures on the economy and consumer
-Their bullish call is not based on GDP growth but on data suprises to the upside due to very low expectations
-Housing sentiment data, NAHB housing index at 5-year high, will carry back into consumer sentiment and spending patterns, which lags housing data by a year or more. Going into a recession you've always had these housing series getting worse, not what you're seeing currently
-Central banks are loosening across the globe, in contrast to 2011 when central banks tightened in response to Fed's inflationary QE2. Currently, inflation rates are tame and central banks are very accomodatative, rather than tightening
-Risk trade has come back: smaller cap stocks, cyclical sectors doing well. Investors rotating out of defensive stocks
-Past the thick of massive layoffs at the state and local level. Outlook for employment will continue to improve
Jim welcomes back Michael Kantrowitz CFA, Director, Portfolio Strategy & Quantitative Research at
About James J Puplava CFP