Salient to Investors:
The MSCI World Index rose 5 percent in January, the most since 1994, on individual investor inflows, US profits, interest rates at record lows, and improving growth from Europe to China. The Index rose 6.4 percent at the start of 1994, and GDP increased 7.7 percent that year, and rose 12 percent at the start of 1987 and GDP rose 14 percent that year: versus the 6.5 percent average since 1980. The Index is at 16.6 times earnings, 22 percent below its average since 1995.
Jerome Dodson at Parnassus Fund said there’s much more confidence the economy is on stronger ground.
In 11 recessions from 1938 through 2009, US stocks rebounded an average of 5 months before a recovery in earnings.
Jeffrey Burchell at Aston Hill Financial said for the first time in years the underlying tone to the market and underlying fundamentals are OK.
The median economist expects world growth of 2 percent in Q1 and 2.4 percent in Q2 versus the average 2.6 percent growth since 1996.
David Herro at Oakmark Intl Fund says stocks remain undervalued on an absolute basis and a screaming bargain compared to bonds.
E. William Stone at PNC Wealth Mgmt said Berkshire Hathaway’s bid for NYSE Euronext last November indicates Buffett expects trading to increase.
EPFR Global reports $10.4 billion inflows into developed equity mutual funds versus outflows of $2.5 billion last year, and $250 billion outflows from US funds over the past four years.
AAII said bullishness reached a two-year high on January 24.
Thomas Lee at JPMorgan Chase said individual investor sentiment is near to registering a SELL signal.
Myles Zyblock at Royal Bank of Canada said the VIX is near its lowest level since April 2007, and indicates growing investor complacency.
Binay Chandgothia at Principal Global Investors is selling stocks, saying January 2012’s gain in the MSCI World index preceded a 5 percent slide during the next 4 months. Chandgothia sees too much short-term momentum to near frothy levels – a couple of disappointing and significant data points can trigger a correction.
The Bloomberg Consumer Comfort Index dropped for a fourth straight week last week, a sign increased taxes are starting to ripple through the economy.
Emmanuel Soupre at Neuflize Private Assets advises caution due to speculative euphoria, US lawmakers facing March deadlines on spending, and Italy going to the polls – the crisis isn’t over.
A. Gary Shilling, says confidence could quickly evaporate as investors are hit with a shock, like a slowdown in China or an oil spike triggered by an Iran-related incident.
The average strategist expects the S&P 500 to rise 2 percent by the end of 2013.
Michael Shaoul at Marketfield Asset Mgmt said US earnings are too healthy for the rally to end, though January may have been the best month for 2013, as we are entering the mature phase of the bull market. Shaoul is encouraged by the largely bottom-up rally on earnings that have beaten expectations.
73 percent of 254 S&P 500 companies reporting have beaten estimates. Bloomberg says S&P 500 profits will increase 7 percent in 2013.
The lockstep moves in global stocks that dominated the past six years are breaking down at the fastest rate since at least 1993, a sign investor confidence is returning.
Ed Hyman at Intl Strategy & Investment said the acceleration in business loans reflects more confidence by lenders as well as by borrowers.
Bank of America said a net 51 percent of global fund managers had bullish positions on equities in January, 4 times the level at the start of 2012.
Daphne Roth at ABN Amro Private Bank said stock gains will continue as pressure to increase allocations mounts for investors who missed the rally. Roth said everyone is realizing the world is slowly but surely recovering, that equities are not expensive and earnings are improving.
Jerome Forneris at Banque Martin Maurel is very bullish on equities as the economy in Europe is improving and so is confidence, and started buying Italian stocks in 2012.
The Shanghai Composite Index entered a bull market on Jan. 29.
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