Tags: Golub | recession | bull | market

RBC's Golub: Stocks Should Keep Rising Until Recession Hits

By    |   Monday, 28 April 2014 02:25 PM

The bull market in stocks may be five years old, but Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, isn't looking for it to end anytime soon.

Seven of the last eight bull markets ended at the beginning of a recession, and the economy isn't close to a downturn, he writes in a commentary obtained by MarketWatch.

On the path to recession, "typically, an accelerating economy burns through existing spare capacity," Golub explains.

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"This leads to inflationary pressure, which forces the Fed to act. As markets anticipate rate hikes, the yield curve inverts. Growth slows and, more often than not, the economy rolls over, taking the market with it."

But that's not happening now, he notes. "The current economic rebound is the slowest of the post-war period," he adds.

"Growth is being held back by a modest housing recovery and weak business confidence. As a result, abundant spare capacity exists, which prolongs the length of the cycle."

For stocks that means price-earnings ratios will keep expanding, producing double-digit returns for the next several years, Golub states.

The Standard & Poor's 500 index rose 6.03 points, or 0.3 percent, to close at 1,869.43, within 2 percent of its record high. The Dow Jones industrial average rose 87.28 points, or 0.5 percent, to 16,448.74 and the Nasdaq edged down 1.16 points, or 0.03 percent, to 4,074.40.

Given the market's torrid rally last year and that fundamentals aren't extremely strong, many experts expect stocks to meander for a while.

"It is a slow, grinding process. It is going to take some getting used to," Mark Freeman, chief investment officer at Westwood Holdings Group, tells The Wall Street Journal. It's possible that "this is what we will be doing over the next several quarters," he maintains.

Editor's Note: 250% Gains Bagged Using Secret Calendar (See Video)

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The bull market in stocks may be five years old, but Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, isn't looking for it to end anytime soon.
Golub, recession, bull, market
316
2014-25-28
Monday, 28 April 2014 02:25 PM
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