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Stock market to rise 30%

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by Peter Switzer

Based on what economists are seeing with US corporate earnings and where New York’s stock exchange indexes are, there’s reason to believe that the shares could rise over 30 per cent between now and March!

That’s the view of Michel Knox, the chief economist of RBS Morgans in Brisbane. Of course, Knox is an economist and is basing his assessment on his computer models.

The key services sector

Only a week ago, the market was thinking the US was heading into a double-dip recession but then along came some better than expected numbers. There were better than expected retail, manufacturing and payroll or jobs numbers.

The private jobs rise in the States was 67,000 and Knox pointed out that they came from the services sector and this is important because 80 per cent of America’s GDP comes from the services sector.

He also pointed out that for the past three months, services jobs have grown by a similar amount — 65,000, 70,000 and now 67,000.

“That’s a healthy sign that there is no double-dip,” he said.

These jobs numbers saw the bond market sold off which pushes up interest rates or yields and the money went to Wall Street.

Knox also added that even though jobs weren’t added to manufacturing, hours were increased.

Return to fair value

In addition his favourite economic indicator for the US — the Chicago Fed National Economic Activity Indicator — said the Yanks are a long way from recession and in fact is growing a little under trend.

Knox thinks over the next four months investors will recognise they were too scared and too cautious and we will “mean reverse” as economists say forcing the market back to fair value.

This would take the S&P 500, now at 1104 “north of 1450” which is over 30 per cent higher! By when? Knox says March next year!

All I can say is I hope that Knoxy’s calculations are absolutely spot on.

For advice you can trust, contact Switzer Financial Services.

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Published on: Tuesday, September 07, 2010