Tags: Gabelli | shock | stocks | Federal Reserve

Mario Gabelli: 'You Can Have a Shock' in Stocks

By    |   Friday, 20 June 2014 10:48 AM

The stock market is fairly valued, but is at risk of a major correction, says star investor Mario Gabelli, CEO of Gabelli Funds.

"The market — based on earnings, based on multiples, based on valuations — is OK. But there's no margin of safety, and you can have a shock," Gabelli told CNBC.

The S&P 500 had a trailing price-earnings ratio of 19.34 Friday, according to Birinyi Associates.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

The S&P 500 Friday posted its third consecutive record-high close. The S&P 500 rose 3.39 points, or 0.2 percent, to 1,962.87. That's slightly above the prior day's record close of 1,959.48. On Wednesday, the index notched another high at 1,956.98. It has risen five out of the last six weeks. The S&P 500 is now up 6.2 percent for the year.

"The shock [to the market] could come out of a faster rise in interest rates . . . because the economy's getting better," Gabelli noted, adding that there are still geopolitical risks also in Syria, Crimea and Iraq. "There's a lot that can go wrong, but there's a lot that can go right."

Given that bullish possibility, he cited three stocks he holds and likes: The Interpublic Group, International Game Technology and International Flavors & Fragrances.

Some investors are optimistic about stocks because they expect the Federal Reserve to maintain its accommodative stance for some time. Most economists don't believe the Fed will raise interest rates until the second half of 2015.

"[Fed Chair Janet] Yellen is a super dove," Lex Van Dam, a fund manager at Hampstead Capital in London, told Bloomberg.

"There remain very few alternatives for your cash other than putting it in stocks. The trend remains up in markets. I believe in the Fed. The economy has recovered on financial engineering."

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

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InvestingAnalysis
The stock market is fairly valued, but is at risk of a major correction, says star investor Mario Gabelli, CEO of Gabelli Funds.
Gabelli, shock, stocks, Federal Reserve
339
2014-48-20
Friday, 20 June 2014 10:48 AM
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