Legendary mutual fund manager Bill Miller says stocks will continue their rally this year — to the tune of about 20 percent.
That would be on top of last year’s 24 percent rally.
Miller, chairman of Legg Mason Capital Management, says stronger-than-expected economic growth will fuel the gains.
The economy could soar as much as 8 percent this year, he estimates.
A replenishment of inventories will boost the economy, Miller told the Financial Times.
"The fall in industrial output seen in the U.S. has far exceeded the actual drop in demand, the shortfall having been made up from inventories,” he said.
“I expect to see a rapid restocking by U.S. companies that will stimulate a sharp rise in economic growth over several quarters."
Stocks are "extremely undervalued" compared to bonds, Miller said.
The fact that stocks just went through their worst decade in history bodes well for their performance this year, he says.
“Every time stocks have performed poorly for 10 years, they have performed better than average for the next 10 years and have beaten bonds every time by an average of two to one," he said.
Miller particularly likes technology and financial shares.
Barton Biggs, managing partner of hedge fund firm Traxis Partners, shares Miller’s bullishness.
Biggs thinks the economy will boost stocks and the dollar.
“My guess is that the next move in both could be on the order of 10 percent,” Biggs told Bloomberg.
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