New York - Arabstoday
Laszlo Birinyi, whose prediction the bull market would weather a five-month retreat came true in October when the Standard & Poor\'s 500 Index rallied 11 per cent, says stocks will keep climbing in 2012. Equities will gain at least eight per cent as improving corporate profits force bears to capitulate, according to Birinyi, who manages $400 million (Dh1.46 billion) in Westport, Connecticut. Forecasts for declines by economists Gary Shilling and Nouriel Roubini were repudiated in 2011 as the benchmark gauge for American equities erased a 13 per cent drop. Birinyi, who advised holding stocks in August as the US government was stripped of its AAA credit rating and strategists cut forecasts faster than any time since the credit crisis, said shares will climb for years to come if history is any guide. Shilling, president of A. Gary Shilling & Co, predicts equity investors will lose money in 2012 as consumer spending drops. \"Many concerns are opinions, but not necessarily facts,\" Birinyi, president of Birinyi Associates Inc, said in a telephone interview on January 4. \"Later in the year, things will get a little bit better and sentiment will change, and we end up at the last leg where we\'ve got the last-guy-in-the-pool scenario.\" The Chicago Board Options Exchange Volatility Index, a gauge of investor concern derived from equity derivatives, averaged 24.2 in 2011, the third-highest level in the last nine years behind 2008 and 2009, data compiled by Bloomberg show. It reached a 29-month high of 48 on August 8. The Dow Jones Industrial Average swung 400 points for four straight days for the first time ever in August. S&P estimate The average S&P 500 estimate from 13 Wall Street strategists tracked by Bloomberg fell more than nine per cent from May through November, the most since 2009. Their forecast for a 6.4 per cent increase in 2012 at the start of this year was the most conservative since 2005, Bloomberg data show. \"Even though we were basically flat, this was a really volatile year,\" Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, who helps oversee $14.5 billion, said in a January 5 phone interview. \"Negative sentiment is what trapped the US market and then we got range-bound because the fear that if Europe slips into a major recession, it takes us with them.\" Birinyi, an equity trader at Salomon Brothers Inc in the 1980s, was one of the first investors to recommend buying when stocks bottomed in 2009. He stayed bullish through the S&P 500\'s decline of 16 per cent in 2010 and last year\'s tumble to 1,099.23 on October 3 from 1,363.61 on April 29. ‘Uncomfortable\' \"Quite frankly, when the market got down 19 per cent, we were uncomfortable,\" he said in a January 4 phone interview. \"But we were uncomfortable in 2010 when the market went down 15 per cent, and it ended up recovering.\" US equities are in the third of four bull market stages, in which investors accept the rally that gathered momentum in the first two, according to Birinyi\'s analysis. He said this phase, which started around July, should end in 2012 with a gain of at least eight per cent. The bull market\'s final phase of ‘exuberance\' has lifted the S&P 500 an average of 39 per cent in the five advances since 1962, he said. Annual Returns The S&P 500 has risen 89 per cent since March 2009, returning 28 per cent a year to investors including dividends as US gross domestic product expanded at an average rate of 2.4 per cent over nine quarters. After ending 2011 virtually unchanged, the index gained 1.6 per cent to 1,277.81 last week, the biggest rally to start a year since 2006. Futures on the S&P 500 advanced 0.8 per cent at 10.07am in London yesterday. While US stocks avoided a bear market in 2011, they posted their biggest decline since 2008, falling 19.4 per cent between April and October. Investors outside the US suffered bigger losses, with the Stoxx Europe 600 plunging 26 per cent and China\'s Shanghai Stock Exchange Composite Index tumbling about 30 per cent. About $6 trillion (Dh22 trillion) was erased from global equity values last year, the second annual decline since 2002.