Tags: Gayed | Stocks | market | surge

Strategist Gayed: Stocks Poised to Surge 40% This Year

Friday, 04 May 2012 07:56 AM

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One market strategist thinks that despite the recent mixed bag of economic data, U.S. stock could surge 40 percent this year.

Michael Gayed, chief investment strategist at Pension Partners, told CNBC that he is "probably among the most bullish of strategists" but he believes that a stock surge could be on the way.

Gayed says that indexes like the Nasdaq, S&P 500 and DAX are still holding at high levels despite fear over Spain's ability to fund its debts and believes that trend can persist.

"If the negative narrative is on its way out, if positive news is about to kick in, and equities are already elevated, then the retail public could easily push stocks to new highs," Gayed believes.

"I’ve been making the case that you could see a 2003 and 2009-like move in equities," he said, "whereby it’s possible that you get something in the order of 40 percent in the broader stock market," he said.

His reasoning for that relates to the reflation trade. Reflation refers to central banks and governments stimulating the economy by increasing the money supply or by reducing taxes — the opposite of deflation.

"What happens when you come off a deflation scare is you tend to have very big moves historically in risk assets,” Gayed said.

Not all experts are as optimistic.

Late last year, Todd Schoenberger, managing principal of The BlackBay Group, a money management firm, predicted stocks would plummet 35 percent in 2012. He’s not backing off that projection, despite the fact that the Standard & Poor’s 500 Index has rallied 11 percent year-to-date.

"So far I’m wrong,” Schoenberger acknowledges to Yahoo. However, much of stock market’s strength in the first quarter was predicated on expectations that the Federal Reserve would embark on another round of quantitative easing, he says.

Other experts are wary of stocks too.

“We see a shift out of risk assets,” Matt McCormick, a money manager at Bahl & Gaynor, tells Bloomberg. “Europe is still considerably weak. We’re in a recovery, albeit a tepid one. Expectations have gotten too high.”

Meanwhile, economist Harry Dent, author of "The Great Crash Ahead," says that a Spanish default, which is increasingly likely, will send U.S. stock markets falling as much as 20 percent.

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