Salient to Investors:

The S&P 500 is up 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe for the first time since 1995. The S&P 500 earnings yield is 6.9 percent versus 2.7 percent on investment-grade US corporate bonds – the spread of 4.2 percent compares with an all-time high of 4.6 percent in 2011.

Max King at Investec Asset Mgmt says good earnings growth, improving economic outlook, good equity valuations, easy monetary policy, skeptical investors and low positioning in equity assets are a major green light for equities.

Laszlo Birinyi at Birinyi Associates said the bull market will last another year as individuals regain confidence and return to equities after withdrawing money since 2007.  Birinyi sees no signs of a frothy, toppy market, which is signalling that the economy and companies are in better shape than people think. Birinyi said the negative case is always more compelling and more rational because it is about now, while the stock market is about tomorrow.

Investors have withdrawn a net $100 billion from US stock funds in 2012, and added $250 billion to bond funds.

The S&P 500 is outperforming broader indexes, but underperformed 9 national markets among 24 developed nations – The DAX  is up 25 percent, the Athens Stock Exchange General Index is up 28 percent. silver, corn and platinum have risen at least 15 percent.

Jason Brady at Thornburg Investment Mgmt prefers things moving up on fundamentals than on a very aggressive central bank – many companies face  headwinds and a real difficulty of getting growth.

Intel and IBM results show the global economic slowdown is curtailing technology spending. GE had its second quarter in a row of lower-than-projected sales.

Wall Street equity strategists expect S&P 500 earnings to rise 4.7 percent in 2012 to $101 per share, the highest on record: a growth rate about a third of the pace in 2011 and the slowest since 2009 – profits have expanded an average 23 percent a quarter since the start of 2010. 117 S&P 500 companies have reported estimates exceeding by 4 percent, sales by 1.8 percent.

Alan Higgins at Coutts said equities are cheap compared to other assets and are more likely to take the lead based on current valuations.

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