Tags: stock market | no worries | inflation | Joseph Keating | RBC Bank

RBC Bank: Bull Market Shouldn't Fear Inflation

By    |   Wednesday, 30 Dec 2009 08:33 AM

The stock market will keep rising next year as the economy rebounds, says Joseph Keating, chief investment officer of private asset management at RBC Bank.

The Standard & Poor’s 500 Index will likely reach 1,300 in 2010, up about 16 percent from current levels, he told CNBC.

“Investors want to see that the recovery in the economy is for real, that it’s going to translate into earnings growth,” he said.

“We think that will happen with a gradual rebound in the economy during 2010 that will push stock prices higher.”

A 10 percent correction is certainly possible, Keating says. “But I think if we get one, that’s a real buying opportunity.”

He’s not worried about inflation.

“There’s just way too much slack in the economy for any inflationary pressures to build.”

And Keating isn’t concerned about the recent run-up in long-term Treasury yields either. “Treasury yields have probably been too low.”

The 10-year yield is likely to reach 4 percent next year, up from about 3.8 percent now, he said.

“But I don’t think that derails the economic recovery, and we can work our way through it.”

The Chicago Board Options Exchange Volatility Index (VIX) indicates Keating might be right about stocks.

The index has dropped to a 16-month low, showing investors are comfortable with the recent rally.

VIX, commonly known as the fear index, represents the price of using options as insurance against a drop in stock prices.

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The stock market will keep rising next year as the economy rebounds, says Joseph Keating, chief investment officer of private asset management at RBC Bank. The Standard Poor s 500 Index will likely reach 1,300 in 2010, up about 16 percent from current levels, he told...
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Wednesday, 30 Dec 2009 08:33 AM
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