Tags: Kotok | Invest | US | Stocks

David Kotok: Invest in US Stocks in 2012

Tuesday, 03 Jan 2012 08:08 AM

This year will be a good one to invest in stocks thanks in part to continued loose monetary policies, says David Kotok, Chairman and CEO of Cumberland Advisors.

Federal Reserve Chairman Ben Bernanke's term ends in 2013, which ups the likelihood that loose monetary policies marked by low interest rates will stay in place, which Fed officials have suggested anyway.

Furthermore, the biggest threats to the U.S. economy would be shockwaves stemming from Europe, which would call for further stimulus from the Federal Reserve as opposed to tightening measures.
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"The present course of monetary policy seems to be set," Kotok writes in a note, according to Business Insider.

bernanke200apv3.jpg
Ben Bernanke
(Associated Press photo)
"Furthermore, any shock that injected risk into the U.S. economic recovery could and would be met with additional monetary stimulus. In 2012, Bernanke has the majority support of the FOMC voting members. We expect no change in Fed policy during 2012."

The Federal Reserve Open Market Committee (FOMC) is the Fed's body that sets monetary policy, and loose monetary policies bode well for stocks,.

On the political front, the U.S. is headed into an election year, which will bring political uncertainty with it.

Nevertheless, expect stocks to remain on the upswing for 2012.

"We expect some early strength in U.S. stocks. We see the earnings rate for the S&P 500 at about an $100 run rate. That puts the market at less than 13 times earnings," Kotok writes.

In other words, equities will be a better play than U.S. Treasury bonds.

The first week of trading in the New Year will serve as a weather vane for stocks, other experts say.

New funds come into the market amid good years, and when they buy during those first five trading days, the market tends to finish the year on the upside.

"An up first week in the market usually signals an up January and as goes January, so goes the year. Since 1945, whenever the market has been up in January it has been up for the entire year, 88 percent of the time," says Sam Stovall, chief equity strategist at S&P Cap IQ, according to CNBC.

"I think investors are paying a lot of attention to the first week of the year."

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2012-08-03
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