Tags: Sozzi | tired | pause | investors

Equity Analyst Brian Sozzi: Stocks Are Tired and Headed for a Rest

By John Morgan   |   Tuesday, 26 Feb 2013 07:56 AM

The stock market is entering a pocket of fatigue that will cause it to pause because there are few growth catalysts, according to Brian Sozzi, chief equities analyst at NBG Productions.

One sign the market is tired is the pickup in mergers and acquisition activity, he told Yahoo.

“Companies are buying growth” by pursuing acquisitions, Sozzi said. “They know [customer] demand is still very challenging.”

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

According to Thomson Reuters Deals Intelligence, more than $158 billion in deals has been announced so far in 2013, more than double the activity in the same period last year.

Gross domestic product showed negative growth in the fourth quarter of 2012, Sozzi noted, and estimates for when the next leg of an economic recovery will occur are being pushed back due to headwinds such as Hurricane Sandy, perpetual federal budget battles and tax hikes.

“I don’t have any confidence that companies have any pricing power. I’m also growing concerned they are running out of way to cut costs.”

Sozzi told Yahoo there is too much “complacency” among investors, and that they have ignored a worsening economy in Europe that will translate into another anchor on U.S. growth.

Investors are mistaken in thinking the bad news is already “priced into” the stock market, Sozzi noted, adding that the market is simply ignoring what it does not want to hear.

“I’m not looking for mega calamity here,” Sozzi said. Instead, he predicted the Standard & Poor’s 500 will simply pull back to about 1,500 to take a rest. In early trading Monday, the S&P 500 was at 1,518.

However, according to Reuters, the recent increase in stock prices suggests the equity rally is intact as investors grow more confident about the global economy.

“The major trend is that indexes will keep moving higher, a reflection that the economy continues to grow at a moderate pace,” said Bernard Baumohl, managing director at the Economic Outlook Group in Princeton, N.J.

Thus far in 2013, the S&P 500 has risen 6.2 percent to hover around its highest levels since 2007.

Reuters said the increase has prompted many experts to call for a pullback, though recently any decline has been used as a follow-up buying opportunity.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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