Tags: Fed | stocks | rates | economy

Bulls Still in Charge of US Market

By    |   Friday, 29 May 2015 09:12 AM

Joe Bell, senior equity analyst at Schaeffer's Investment Research, provided to CNBC an example of a very conventional view of the U.S. stock market, which is that it still has room on the upside since fund managers have been concentrating on Europe and Asia because of new rounds of monetary ease there. This writer would note that the Federal Reserve has still not taken the much-anticipated action to raise interest rates, and one of the reasons is probably its impulse to continue to support the economic expansion and the bull market. Bell's specific recommendations are CarMax (KMX), GoPro (GPRO) and Johnson Controls (JCI).

Angel Gurria, Secretary-General of the OECD, made a confident statement that a deal will be worked out for Greece, perhaps with a stopgap measure. Asked why U.S. Treasury Secretary Jack Lew is involved, Gurria said it is because of the larger implications for policies that affect the future of the euro and the arrangements that support it. This writer is looking for someone to bring back to the discussion, as International Monetary Fund Managing Director Christine Lagarde recently did, of the risk of writedowns and fire sales of financial assets. One wonders to what extent the U.S. will continue to intervene to forestall such events.

Mitul Kotecha, head of FX strategy in the Asia Pacific for Barclays, holds the conventional view that the U.S. economy will follow a weak first quarter with stronger growth, and he specifically said he believes that Fed Chair Janet Yellen will proceed to increase interest rates as soon as September.

For a reliably contrary view, consider Peter Schiff, CEO of Euro Pacific Capital, who disagrees frontally with the stronger growth scenario and said, "The second quarter will also be very weak, and how are they going to blame that on the weather?" Asked whether inventories are part of the explanation for another slow quarter, Schiff responded, "A lot of businesses bought into this recovery story, so they loaded up on inventory that they can't sell, because their consumers are too broke to buy it, because their part-time paychecks don't give enough spending power."

Schiff added that last year's numbers also benefited from a boost in spending on Obamacare. He predicted a "collapse" of the economy under the weight of the problems he mentions, followed by another rescue by the Fed in the form of yet another round of quantitative easing, "the same sort of toxic medicine that made it so sick in the first place." He accused the Fed of "just bluffing, because they want to pretend that the economy is actually strong enough [to raise interest rates], but the economy is a giant bubble, and if the Fed raises rates, they're going to prick it." Schiff concluded, "The Fed is trying to talk the economy up and pretend that its medicine worked, even though the patient is sicker than ever."

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Robert-Feinberg
Joe Bell, senior equity analyst at Schaeffer's Investment Research, provided to CNBC an example of a very conventional view of the U.S. stock market, which is that it still has room on the upside.
Fed, stocks, rates, economy
482
2015-12-29
Friday, 29 May 2015 09:12 AM
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