A bull market is raging in U.S. stocks, with the Standard & Poor’s 500 Index up 4.5 percent so far this year.
But Jim Bianco, president of Bianco Research, doesn’t think the good news will last much longer. Stocks may rise another 5 or 6 percent, and then that’s it, he tells Yahoo.
Why the pessimism? First central banks will soon stop easing policy, taking away a major pillar of support for the market. And second, corporate earnings really aren’t that strong, Bianco says.
As for central banks, “in a word it’s QE [quantitative easing] world,” Bianco said.
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“If you look at central bank balance sheets, they’re all going up in almost a parabolic fashion, whether it’s the ECB, or our Fed, . . . on and on.”
When central banks print money, risk markets do well, Bianco notes. But it appears that the easing is nearly complete. “If so the rally goes way," he says.
As for earnings, profits for the S&P 500 are growing 9 percent year over year. But if you subtract just one company, AIG, it’s 3 percent, Bianco says. “All of the sudden earnings momentum is really slow.”
After the Federal Reserve’s statement Tuesday that it envisions keeping interest rates extremely low through 2014, many investors disagree with Bianco.
"What caught the market off guard was obviously the fact they are going to keep rates lower for longer," John Canally, investment strategist at LPL Financial, tells Reuters.
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