Tags: Kotok | stock | market | factor

Cumberland's Kotok: 6 Reasons Why Stocks Still Have Juice

By    |   Friday, 27 June 2014 11:10 AM

With the S&P 500 standing within 1 percent of its record high, some financial commentators say the end of the five-year bull market is near.

David Kotok, chief investment officer of Cumberland Advisors, cites in his Market Commentary six factors that drove the market in the second quarter and why you should stick with stocks.

1. The short-term interest rate remains near zero.

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2. Although they were expected to rise, long-term government bond rates have fallen.

3. Inflation rates worldwide are at very low levels. "In Europe, the inflation rate is now recorded at 0.50 percent," he writes.

4. Central banks are continuing easy money policies. For instance, Kotok states, "Even though the Federal Reserve is tapering, it is still expanding excess reserves and acquiring assets on its balance sheet."

5. The federal deficit is still falling, from a[n annual] run rate of $1.4 trillion at its peak to an annualized run rate of $400 billion.

6. The trade deficit and current-account deficits are shrinking because of the growing U.S. energy self-sufficiency.

"The combination of these factors continues to support equity prices. On a comparative or relative basis, stocks still seem attractive," he insists.

"The bottom line is that the stock market is still in an uptrend."

The market's next move might depend on U.S. economic strength. GDP shrank 2.9 percent in the first quarter, but many economists expect it will expand more than 3 percent for the rest of the year.

"In the third and fourth quarters, we should see [strong] growth, but anything that calls that into question . . . will be a problem," David Donabedian, chief investment officer of Atlantic Trust, tells The Wall Street Journal.

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With the S&P 500 standing within 1 percent of its record high, some financial commentators say the end of the five-year bull market is near.
Kotok, stock, market, factor
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2014-10-27
Friday, 27 June 2014 11:10 AM
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