I think it's about time for a compelling argument that the stock market could be making a turn around...right? Well like it or not Chrisopher Hill, editor of Investorazzi.com, has come to make an argument that he'll be defending in the comments section! So if you think otherwise tell him why!
Equities have been on a roll these past two months. On Monday, the Standard & Poor’s 500 Index, which is a meaningful benchmark to investors because it generally reflects the movements of the U.S. stock market as a whole, reached a four-month high to close at 907. The tech-heavy Nasdaq Composite Index also has been on a tear, finishing Monday at 1,763--- up 11% for the year.
At this point, many traders and investors are asking, is the current rally in equities sustainable? Or, are U.S. stocks about the make a U-turn and head south?
Recently, a couple of legendary investors shared their views on where stocks might be heading.
Back in early March, Marc Faber, who is famous for warning clients to get out of the U.S. stock market a week before the October 1987 crash, predicted that U.S. stocks would rally. On April 13, the money manager told a Bloomberg Television audience:
“Now the market in the very near-term has become somewhat overbought, and the correction should essentially follow. But I doubt we’ll go and make new lows in the intermediate future… and that we have another push up into July, for the simple reason that the economic news is not good, but it will not deteriorate at a much faster pace, than when the economy collapsed and fell off a cliff between September and February of this year.”
On April 28, a piece appeared on the TIME magazine website in which Jim Rogers talked about his latest investment outlook. Rogers, who is more known for his work with commodities these days, shouldn’t be forgotten for his accomplishments down on Wall Street. As a co-founder of the Quantum Fund with George Soros in 1970, Quantum gained 4,200% over the next ten years while the S&P 500 advanced only 47% during that same period. Anyway, this is what the CEO of Rogers Holdings had to say last week about U.S. equities:
“We could have a rally for who knows, six months, a year, we could have a rally for a while after having had the kind of collapse we did. In the ‘30s the stock market rallied frequently. But in the end it was still the Great Depression.”
Legendary bond investor Bill Gross also has doubts regarding the sustainability of this latest rally. In his just-released “Investment Outlook” for May, the founder and chief investment officer of PIMCO said:
“Do not be deceived by the euphoric sightings of ‘green shoots’ and the claims for new bull markets in a multitude of asset classes. Stable and secure income is still the order of the day. Shaking hands with the new government is still the prescribed strategy, although it should be done at a senior level of the balance sheet. If the government indeed becomes your investment partner, you should keep the big Uncle in clear sight and without back turned. Risk will not likely be rewarded until the global economy stabilizes and the Obama rules of order are more clearly defined.”
Even legendary stock investor Warren Buffett might be shying away from equities these days. In a piece that appeared on the NBC Philadelphia website on Monday, CNBC’s Alex Crippen wrote:
“.. in a live CNBC interview with Becky Quick in the driveway of his Omaha home, Buffett repeats his long-held optimism that the economy will get better -- he just doesn’t know when…
‘American economy is slow, and still getting slower, but that will turn’ .. just don’t know when .. hopes it’s soon…
‘The cheaper things go, the better I like it’ .. especially when compared to buying Treasuries .. stocks will beat out Treasuries over the long-run. Asked if he or Berkshire has been buying stocks recently, he repeated his statement that he likes things when they’re cheaper.”
CNN Money’s Colin Barr wrote that same day:
“Berkshire Hathaway is ready to make a deal at the right price, but it has nothing in its shopping cart right now, CEO Warren Buffett said Sunday.
Buffett, the billionaire investor who runs the conglomerate, said Berkshire has $20 billion in cash and is ‘perfectly willing to make a deal that’s compelling’ should one arise.”
If we are truly in a “trader’s market” these days, as Dr. Faber remarked some time ago, it might be best to watch out for a U-turn in U.S. stocks considering recent comments from some of the world’s greatest investors.
Christopher E. Hill
“Tracking The World’s Greatest Investors”