“U.S. stocks have too much momentum to make betting against the Standard & Poor’s 500 Index a winning strategy and the gauge will probably reach 1,900 next quarter, according to money manager Laszlo Birinyi.
Birinyi, the founder of Birinyi Associates Inc. and one of the first analysts to advise clients to buy when stocks were bottoming after the 2008 financial crisis, said in a phone interview Feb. 7 that the benchmark gauge for U.S. equities will increase almost 6 percent by July.
It fell 5.8 percent in the three weeks staring Jan. 15, losses he said signal healthy skepticism that set the stage for more gains.
“I don’t like when the market just shrugs these things off,” Birinyi said from Westport, Connecticut. “It’s OK to just stop and take a deep breath. The market should have some sort of a negative reaction when you have problems in Turkey and Argentina. That didn’t make me uncomfortable.”
Weakening currencies from Argentina to Turkey, cuts to Federal Reserve stimulus and slower economic growth in the U.S. and China sent the S&P 500 to its worst performance to start a year since 2010. While almost $3 trillion was erased from share prices globally, the retreat failed to stir bearish speculators, who left bets against S&P 500 companies near the lowest level on record, data compiled by Bloomberg starting in 2006 show. The gauge’s futures slid 0.2 percent at 8:25 a.m. in London.
Lesson Learned
“Short sellers have probably learned their lesson” after a year when 460 of 500 companies in the benchmark index climbed, the most since at least 1990, Birinyi said. At the same time, “there’s nothing that you can say is a bargain or a real value” if you’re a bull, he said. “You have situations on a day-to-day basis that will give you opportunities, and that’s what we’re trying to take advantage of.”
In a short sale, a trader borrows stock and sells it, hoping to profit by replacing it after a decline.
Shares rose last week as reports suggested the U.S. economy may weather Fed stimulus reductions. The S&P 500 added 0.8 percent to 1,797.02, snapping the longest weekly losing streak since May 2012 The gauge rallied 2.6 percent in the last two days, the most since Oct. 11, to push its price-earnings ratio to 16.6. The five-year average is 15.5, according to data compiled by Bloomberg.
The 70-year-old investor has defied market pessimists throughout the five-year bull market that sent the S&P 500 up 166 percent, writing in December 2008 that stocks were near a bottom. In September 2011, he said U.S. companies were earning too much to be dragged lower by Greece’s debt crisis. The index is up 56 percent since then. A year later, with the gauge at about 1,400, he said comparisons with prior bull markets suggested it could reach 1,500 in four months. It took five.
Shorts Retreat…”
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