Smartest investment pin-up girl
by Peter Switzer
Wall Street pulled back which is typical with profit-takers likely to bank some profits ahead of the big news items next week. These include QE2 and the US mid-term elections — both events could be market-movers.
By the way, some of the small fall for the S&P 500 — down 3.19 points or 0.27 per cent — was linked to QE2 possibly being smaller than the market has expected.
And while this is all speculation, I am more interested in what one of my favourite US expert investment strategists — Abby Joseph Cohen of Goldman Sachs in New York — had to say about the US economy and the market going forward.
On QE2 she said the Goldman economics team thinks the Fed will have a big QE2 but could start small, though they suspect the first tranche could be as ‘small’ as $500 billion! The total injection of stimulation could wind up being $1 trillion.
(This figure should be repeated as Dr Evil would say it in the movie Austin Powers to understand just how significant this number is.)
The highly regarded analyst is growing in confidence on the future for the economy and the market. Cohen reminds us that aside from QE2, company earnings figures have been better-than-expected. She also points out macro-economic data has started to come in more positively than many market experts had been predicting.
She also pointed out that the key companies “that we follow” are seeing revenues going forward giving her confidence in the outlook for the market and the economy.
Despite this, Goldman is in the slow growth camp until mid-2011 when she expects a pick up from growth rates. Before that she expects growth should hover around 1.5 per cent. While these are not flash rates of growth, they’re still a long way from a double-dip recession.
On right here, right now she thinks the market is underpriced and this is where she gave the best advice that everyone should take on board: “Equity investors should always look out into the future and on a six to 12 months rolling basis this is a market that is priced below what we consider is fair value.”
Even using below consensus economic forecast and S&P earnings forecast Cohen thinks that fair value is 1275 and at the moment the index is at 1182.45.
She likes commodities and that has to be good news for the Aussie stock market but remember you have to invest now based on what will happen in the future.
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Published on: Thursday, October 28, 2010blog comments powered by Disqus