Tags: stocks | Fed | earnings | stimulus

MSN's Jim Jubak: A Stock Rally Could Last Until December

Wednesday, 16 Oct 2013 08:03 AM

By John Morgan

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A post-government shutdown rally in stocks could last until December, but after that the investing environment gets very murky, according to MSN Money columnist Jim Jubak.

Jubak said his prediction is the government standoff will end before a U.S. debt default occurs, and then a relief rally is in the cards.

“Of course, this almost universal belief in a relief rally may be the reason stocks haven’t fallen very far and that the markets haven’t created very many bargains,” he said.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

After that, two concerns that were unsettling the markets before the government shutdown, China's growth and Federal Reserve tapering, could be revived, in Jubak’s view.

Official data from China is not expected to show anything less than the targeted growth of 7.5 percent, at least prior to the Communist Party’s Central Committee meeting in November.

The next meeting of the Fed’s Open Market Committee is Oct. 30, and many observers doubt the Fed will trim back its monthly $85 billion worth of bond purchases then.

“Even if U.S. politicians wrap up the current mess relatively quickly, the Fed simply won’t have enough data by the time it meets to know how much damage the government shutdown and the debt ceiling uncertainty did to the U.S. economy,” Jubak said.

Since there is no November meeting, the earliest the Fed could start pulling back on its asset-purchasing stimulus would be the Dec. 18 meeting.

Jubak said it is favorable that the stock market has not had a big decline during the government shutdown.

“But the lack of a correction and the lack of bargains does raise the risk of adding new positions here or adding to existing ones. To invest at this point means we are still expecting that U.S. stocks will climb from historic highs to even higher levels.”

On CNBC, hedge fund pro Leon Cooperman said he also sees a lack of bargains in the current stock market.

"By in large, we have not gotten into that speculative phase of the [bull] market," said Cooperman, chairman and CEO of Omega Advisors. "As an investor, I think the market is reasonably valued. I have to kind of work hard and find stocks and macro themes."

Bob Doll, chief equity strategist at Nuveen Asset Management, said in his weekly commentary that stocks have been in a trading range recently as the market digests strong 2013 gains.

“We maintain our view that in order to advance, equities will need visibility on stronger revenue and earnings growth,” Doll said.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

Relates Stories:

Why Stocks Don’t Reflect the Economy

David Kotok: Get Ready to Deploy Cash Into US Stocks

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