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Wall Street's Biggest Bear Now Bullish

By Dan Weil   |   Thursday, 16 Jul 2009 09:07 AM

Barry Knapp, head of U.S. equity strategy at Barclays, used to be the biggest stock-market bear in Bloomberg’s survey of 10 market strategists.

Now he has turned bullish. Knapp expects the Standard & Poor’s 500 Index to climb 3 percent for the year.

Why is he bullish now? Rising industrial production and stabilization in the credit markets will pave the way for gains, Knapp told Bloomberg.

“The key point is that the capital markets have normalized,” Knapp said. “The broad improvement in capital markets implies that the recovery is very much alive.”

Previously, Knapp had forecast a 17-percent decline for the S&P 500, with weak bank earnings and consumer spending weighing down stock prices.

But after falling to a 12-year low in early March, the S&P 500 has rebounded 36 percent amid optimism about the economy.

“The magnitude of the advance took us by surprise,” Knapp wrote in a note to clients.

“It was double what we were expecting in half the time. History suggests you get a 5-percent to 10- percent correction after the initial advance before witnessing another push higher.”

Knapp’s year-end prediction of 930 for the S&P 500 still trails the average forecast of 985 among the strategists polled by Bloomberg.

Not everyone is bullish. After the market gained 2.49 percent Monday, Joseph Saluzzi of Themis Trading told The New York Times, “I think people got a little ahead of themselves. This could be a one-day wonder.”

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Barry Knapp, head of U.S. equity strategy at Barclays, used to be the biggest stock-market bear in Bloomberg’s survey of 10 market strategists.Now he has turned bullish. Knapp expects the Standard & Poor’s 500 Index to climb 3 percent for the year.Why is he bullish now?...
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