Wall Street Soothsayer Says 4-5 Percent Correction In Next 30 Days; While Oppenheimer’s Chief Investment Strategist/ Stoltzfus Says ‘Political Trouble,’ & North Korea Won’t Derail Stocks – Forecasts S&P 500 To Gain 7 Percent Into Year’s End
There will certainly be much more important issues to confront and think about this week than money; but, the world does not stop, and equity markets will still trade. While our focus this week won’t likely be centered on money and stocks, one cannot afford to ignore or put on auto pilot — our financial retirement future. But, first things first. My heart and prayers go to the residents of Florida, who at this moment are enduring the ravages of Hurricane Irma. We can only hope and pray for a minimal loss of life; and, less infrastructure damage than feared. The other major reflection point will be tomorrow — Monday, September 11, 2017 — sixteen years after the terrorist attack on New York City, the Pentagon, and Shanksville, Pennsylvania occurred. Those brave souls on United Airlines Flight 93 likely prevented a horrific attack on Capital Hill in Washington D.C. We must embrace our fellow citizens who are in harms way in Florida; provide encouragement and support to those hoping to rebuild in Houston; and, remember those who perished and gave their lives on September 11, 2001.
As Ben Levisohn wrote in this weekend’s (Sept. 11, 2001) Barron’s, “THE MARKET SHOULD BE FACING A DISASTER of biblical proportions. We have hurricanes, earthquakes, a nuclear-armed dictator in North Korea threatening to unleash fire and brimstone, and yes, even a Republican POTUS working with Democrats in Congress.” But, the most hated bull market in recent memory hardly noticed, as “the S&P 500 declined by just 0.6 percent last week, to 2,461 points; while the DOW fell 189.77 points, or 0.9 percent, to 21,797.79 points; and, the NASDAQ dropped 1.2 percent, to 6,360 points,” Mr. Levishon wrote. And, despite this muted decline, the S&P 500 is just 0.8 percent below its all-time high. A strong S&P 500 earnings quarter; and, deregulation are helping to sustain this bull market through some rough waters.
For the year, the DOW is +10.3 percent; while the S&P 500 is +9.94 percent; and the NASDAQ is +18.15 percent. My own personal portfolio is hanging just a thread below +31 percent ytd.
With September Historically Being The Worst Month Of The Year For Stocks — Where Do We Go From Here
As with almost anything, the answer to the above…..depends on who you ask. Tom Lee, Managing Partner, and Head of Research at FundStrat Global Advisors was interviewed on Friday’s Half Time Report on CNBC, about his prediction that the U.S. stock market is likely to endure a 4-5 percent decline in the next 30 days. Mr. Lee has a pretty strong track record for calling major market moves, so his prediction, I am sure, was noted by traders and financial institutions both here and abroad. Mr. Lee told CNBC that unless inflation picks up, stock prices at current levels (he says 19X earnings vs. historical average of 15/16) are expensive and not justified. Mr. Lee’s forecast for a 4-5 drop in stocks in the next 30 days isn’t all that shocking, especially since this market has been on such a tear; and, September historically is the weakest/worth month of the year for equities. So a 4-5 percent pullback this month wouldn’t be a shock to anyone in my opinion. Indeed, I moved to a 33 percent cash position in the portfolio Friday morning; and, before Mr. Lee’s market call. But, as you might guess, not everyone agrees…..
“I remain optimistic,” said John Stoltzfus, Oppenheimer Asset Management’s Chief Investment Strategist in a CNBC interview last Wednesday on their Trading Nation segment. “We don’t believe we’re headed into a period in which we will see the markets turn chaotic from here to the end of the year,” he added. “That said, we don’t expect the market to take off in a straight line higher.” “But, he’s predicting the S&P 500 will end the year at 2,650,” wrote Stephanie Landsman on the September 7, 2017 edition of CNBC.com. That would represent about another seven percent gain for the index by year’s end, if he is correct. Ms. Landsman added that “based on a [CNBC[ survey of 16 strategists, Mr. Stoltzfus is Wall Street’s second-biggest bull.”
If your portfolio is solidly in the black, there is nothing wrong will being a little cautious as we move deeper into September, historically, the worst month of the year to be in stocks. As I noted earlier, I moved to 33 percent cash on Friday and will see how the futures look tomorrow, Monday, September 11, 2017. If futures appear weak, I may put some money to work in a gold ETF such as the GLD, or the GDXJ. Neither would be a long-term trade for me. The real known, Speckled Swans that could disrupt this bull market would be an escalation in tensions between the U.S. and North Korea; an unexpected raise in interest rates by the Federal Reserve, and/or unexpected hawkish language, and, a downturn in S&P 500 earnings and outlook for the remainder of this year.
Regarding where he recommends clients invest going into the end of the year, Mr. Lee told CNBC he likes: Telecom, Energy, Technology, Financials, and Materials. I personally like technology — especially cyber security stocks — and the bio-pharma sector. Good luck whatever you do; and, Godspeed to the residents, families, loved ones and friends of those residing in Texas and Florida. Keep your chin up. And, remember those who died on 9/11. V/R, RCP