Equity Bulls Getting Ready To Rampage Again ?

Technorati Tags : bloomberg, equity markets, interest rate, subprime

A collation of comments from a couple of Bloomberg pieces this morning, showing the level of excitement amongst Stock market bulls, who are totally unfazed by the Credit market problems, and view the recent downturn as an unequivocal buying opportunity. Buying on dips has been rewarding behaviour for such a long time, that it would be unreasonable to expect a turnaround in market thinking in the short term. Which could mean that we will likely see a 300 point rally in the Dow over at least one day in the current week ?

``You look at earnings, you look at ongoing takeovers, and I'm happy to increase holdings as valuations improve,'' said Andy Brough, who helps oversee $7.6 billion at London-based Schroder Investment Management Ltd. ``You make money buying shares when markets are falling, and that is what I've been doing.''

Money managers say the 4 1/2-year bull market remains intact, even after stocks around the world lost about $2.1 trillion of market value last week, according to data compiled by Bloomberg. Equities are even more of a buy because profits are growing, shares remain cheap compared with earnings and the Federal Reserve isn't restricting credit, according to fund managers at Schroder, ABN Amro Asset Management, BlackRock Inc. and JPMorgan Private Bank.

``This whole subprime issue is of course not positive,'' said Astrid Smit, head of investment strategy at ABN Amro, which oversees $260 billion. ``But the fundamentals still look good. If you sell equities, what are you going to buy? In the current environment, it is still the preferred asset class to own.

``The market has chronically wanted to produce a crisis,'' said Paulsen, the chief investment strategist at Minneapolis-based Wells. ``When you're seeing financial stocks getting their heads taken off, it's hard to step in. But there's a possibility of a good return over the six- to nine-month horizon.''

``People have taken their eyes off the good news, the fact that the economy seems to be poised to reaccelerate, that earnings have been much better than expected,'' said Jack Caffrey, the New York-based equity strategist at JPMorgan Private Bank, which has more than $300 billion in client assets. ``This has been something of a gift. You have the chance to buy at particularly low valuations.''

Robert Doll, who oversees $1.2 trillion as chief investment officer of global equities at BlackRock in Plainsboro, New Jersey, said some of his funds bought shares of energy producers as the market declined last week. ``Global growth continues to boom,'' said Doll, who predicts the S&P 500 will rise another 6.2 percent this year. ``The building blocks for this bull market are still there.''

``As some of these sectors get beaten up it gives you an opportunity,'' said Robert Schumacher, who helps manage $135 billion as chief investment strategist at Van Kampen Investments in Oakbrook Terrace, Illinois. He expects the S&P 500 to climb as much as 20 percent in the next 12 months. ``This isn't a systemic problem that the economy can't overcome.''

Those valuations, coupled with steady Fed interest rates since June 2006, are enough to make stocks a buy, said Walter ``Bucky'' Hellwig of Morgan Asset Management. The turmoil in the credit market is allowing him to add to holdings in technology, energy, and raw-material shares at cheaper prices. ``In a perverse sense, the widening of these spreads in conjunction with rising earnings makes the stock market more attractive,'' said Hellwig, who helps oversee $30 billion in Birmingham, Alabama. ``Interest rates are still low, inflation is still low, and there still is global growth and equities are becoming more attractive.''