Investment guru Marc Faber says the rally that has sent the Standard & Poor’s 500 Index flying 29 percent higher from its March 6 low has more room to go.
The index, now at 862, may rise another 16 percent, to 1,000 within three months, he tells Bloomberg Radio.
And what will drive it higher? Rising bank profits, boosted by government aid, Faber says.
“You have essentially a government that gives financials free money at the expense of the taxpayer,” Faber says.
“With this free money, they may actually have decent earnings in the near future.”
Citigroup shares, now trading at $3.74, can “easily rebound” to $5 or $10 before drifting down again and possibly being wiped out, Faber says.
A market correction may be in store before the next leg up, Faber says.
“The market very near term has become somewhat overbought, and the correction should essentially follow, but I doubt it will go and make new lows in the intermediate future,” Faber says.
“The lows in early March at 666 in the S&P will hold, and we’ll have another push up into July.”
Other experts are bullish on bank stocks too.
"The market is cheering, not so much that the banks are on the mend, but that they are not going to die," Les Satlow, portfolio manager for Cabot Money Management, tells Reuters.
“These are banks that are clawing their way back, literally from the brink of extinction.”
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