Yahoo Finance Writes: Stocks poised for huge gains in 2014: Top strategist
Even though 2014 has started off with a whimper for the markets, Jonathan Golub, Chief US Market Strategist at RBC Capital Markets, believes that stocks could hit record highs this year.
“If we’re looking at an economy that’s probably going to grow at 2.5% this year – which is a very reasonable number,” says Golub, “that should be enough to drive something between 7% and 8% or more of earnings growth.”
“If you look at valuations, [stocks] still look very cheap relative to bond,” says Golub. “You add those two together and I don’t see why you wouldn’t have a double-digit return this year.” Golub says history shows stocks can still have a good year after a great year. In 2013, the S&P 500 had return of 29%.
“If you look at the 10 best years over the last 75, the average return has been about 14% following really great years,” says Golub.
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The article above represents a prevailing view on Wall Street today. With bearish sentiment at an all time low, NO ONE sees any potential downside. If you are to listen to the main stream financial propaganda machine and most of the large banks, the stock market is going to the moon and beyond.
Yet, for any reasonable investor this time period should represent a perfect opportunity to pause and reflect on where we really are. Let’s think about this for a second….
Is our economic recovery real?
NO. The main street is not feeling any type of an economic recovery. With poverty rates being at 50 year highs and with “real unemployment” pushing over 15%, only financial entities have been able to benefit from any type of an economic recovery. Once again, the perceived economic recovery has been driven by massive infusion of credit into the financial system through QE, low interest rates and speculation.
Is the stock market overpriced?
Absolutely. While everyone will have their own definition of “overvalued”, as a value investor, I cannot find anything to invest in. Everything is overvalued and the prices I see today are reminiscent of 2000 and 2007 time frames. However, if you enjoy buying $1 bills for $5, go for it.
Is there extreme Bullish sentiment?
Yes. Most sentiment indicators show that most bears have been killed. Some of the bullish sentiment readings are at an all time highs. Higher than 1987, 2000 and 2007.
What does history teaches us about such times?
Well, the history teaches us that such times are dangerous. Listen, there is no doubt that the market is overpriced and highly distorted by credit and speculation. This cannot continue for an indefinite period of time. No matter what, the markets always readjust themselves. As my mathematical work clearly indicates, the bear market is about to start in 2014. Get yourself ready.
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Why Stocks Are Poised For Huge Losses In 2014