Tags: Birinyi | Investors | US | Economy

Birinyi: Investors Are Underestimating US Economy

Tuesday, 06 March 2012 07:48 AM

Investors are underestimating the strength of the U.S. economy, which could grow 4 percent in 2012 instead of the gloomier 2 percent gross domestic product (GDP) growth forecasts proposed by many economists, says stock-market bull Laszlo Birinyi, of Birinyi Associates.

"This year the bet is GDP of 2 percent to 2.5 percent," Birinyi tells CNBC.

"When I look at the market I see stocks like Cummings and Salesforce.com, Microsoft, General Motors up 20, 30 and 40 percent. That makes me question, maybe the market’s saying something about a good economy."

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Gross domestic product forecasts have surprised in the past, and they can surprise again.

"I just wonder if we’re prepared for a 3 percent to 4 percent GDP? If it does [reach that level] I think we can again have a mirror of 1995 where the market surprised everybody on the upside," Birinyi says.

Expect the S&P 500 broad stock index to climb 20 percent this year to 1,700, Birinyi adds.

Other experts expect the stock market to improve provided economic indicators keep improving, unemployment especially.

"The rally will continue as long as better economic information continues. The question is, 'Are we seeing some sustainable improvement in the economy?' I think the answer is 'yes,' so I think there is going to be some continuation in the rally," says Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois, according to Reuters.

The S&P 500 index is up 9 percent on year while the Dow Jones Industrial Average is up 7 percent.

Editor's Note: Google Banned This Video But You Can Watch it Here

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