Belski: Capital Spending Revival to Fuel 'Super' Bull Market

Monday, 18 Feb 2013 10:57 AM

By John Morgan

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The United States is entering a super bull market that will be led by capital reinvestment by American companies, according to Brian Belski, chief investment strategist at BMO Capital Markets.

The nation’s corporate interests have already completed the process of deleveraging, he told Yahoo Breakout in an interview.

But they are still cash-rich, even after having used recent years to buy back stock, pay dividends or buy other companies. The only place left to go with their money hoard now is capital reinvestment, or capex, he predicted.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

“We want to see them invest in their own company, and we think it’s actually going to be forced upon them,” Belski said.

“This trade has a very long tail. The cycle is already in place. We believe we’re in the midst – the beginning stage – of this super bull market that can be 15-18 years in length. This is the first stage of it.”

American companies are worried about potential supply-chain disruptions caused by economic problems elsewhere, Belski said, so investing in U.S. operations will help drive the capex trend.

“We believe because of the consistency and stability of U.S. corporate fundamentals that business volumes will come back to America because of the volatility (overseas),” Belski told Yahoo.

As for investing strategy, Belski identified three sectors he predicted will profit from the trend --- industrials, energy and technology. “All three will benefit from capex revival,” he said, maintaining those sectors are the most mispriced by the stock market below their fundamental values.

Earlier in the week, Goldman Sachs CEO Lloyd Blankfein agreed a new U.S. stock market uptrend may be arriving, but for different reasons.

Blankfein told CNBC that the nation’s "economic underpinnings are actually better than they have been for some time."

"We could be on the threshold of a bull market," Blankfein said.

He ticked off extremely low interest rates, a "terrific" energy production posture that can drive manufacturing and create jobs, and a continued turnaround in housing as reasons to be bullish.

Separately, a USA Today analysis concluded the current U.S. stocks have a lower market valuation than the five prior bull markets since World War II had at their peak.

But Laszlo Birinyi, a renowned market analyst who was among the first to call the market bottom four years ago, said recently the bull market likely entered its fourth and final stage last summer.

He told CNN Money the U.S. stock market is now in an "exuberance" period before the end.

"This is when all the people who have been reluctant and hesitant to invest in the stock market start realizing this isn't the New York City subway system," said Birinyi, president of research and money management firm Birinyi Associates. "There's not going to be another train coming, so they better get on board."

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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