Tags: Stifel | Nicolas | stocks | Fed

Stifel Nicolas Analysts See Stocks Steady for Rest of Year

Friday, 14 Mar 2014 08:20 AM

By Dan Weil

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Stifel Nicolas analysts predict the stock market rally will fizzle, leaving the market little changed for the year.

In a commentary obtained by CNBC, Stifel strategist Barry Banister offers 10 reasons for that view:

• The Federal Reserve won't be successful in handing off responsibility for economic growth to the private sector.

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• Price-earnings multiples will stop rising, as the Fed tapers its quantitative easing.

• The Fed's "unwillingness to accept market-clearing price deflation." Bannister said Fed policy now represents "a vain attempt to lower the cost of capital in lieu of accepting price deflation."

• Rising interest rates will hurt business capital expenditures and housing.

• The Fed is tightening policy too slowly, leaving the economy vulnerable to an inflation outbreak.

• A correction is overdue after the Standard & Poor's 500 Index surged 29.6 percent in 2013.

• Bullish sentiment has gone too far — more among Wall Street analysts than retail investors.

• Institute for Supply Management data point toward consolidation around 1,850 for the S&P 500. It closed at 1,846.34 Thursday.

• Valuation readings are at appropriate levels.

• Analysts' optimistic earnings forecasts don't match gold and silver prices.

Investor sentiment turned bearish toward stocks Thursday, at least temporarily.

"At these levels markets cannot tolerate any bad news. Fundamentals have been so stretched that we think we will have a significant correction by the end of this month," Uri Landesman, president at Platinum Partners, told MarketWatch.

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