After Presidential Pause, Markets Could Trend Higher Through Thanksgiving

Excerpt from Raymond James strategist Jeffrey Saut's latest essay, published Monday (November 3rd):

...[W]e have been recommending various attractively yielding convertible preferreds that play to companies with clean balance sheets and decent fundamentals. Additionally, last week we “dialed in” the trading account (for the first time in weeks) by recommending a number of exchange-traded funds [ETFs] and in some cases employing a hedging strategy to reduce trading risk.

Our trading/investment vehicles of choice were ANY asset that has been slaughtered over the last three months. Of particular interest were the materials and energy complexes, with particular emphasis on the unloved natural gas stocks, all of which are rated Strong Buy by our fundamental analysts, like Petrohawk (HK), Goodrich (GDP), and Chesapeake (CHK).

However, the real trick from here is to figure out which assets collapsed due to simply the liquidity crunch; and, which ones collapsed because of not only the liquidity crunch, but the slowing economy. As the astute GaveKal organization notes, “In the first category are Asian and U.S. credits, U.S. non-cyclical large-caps and exporters, Japanese equities, deposit-taking banks, etc. In the second category, we would leave Eastern and Southern Europe.”...

...Despite the lousy news backdrop, the SPX spurted over 10% last week; and when stocks ignore bad news that’s good news! We think, after a Presidential Pause early this week, the equity markets will continue to trend higher into our targeted Thanksgiving date. Yet while last week’s SPX gains were spiffy, the real winners of the week were things like lead and nickel, which soared 28%, consistent with our bullish near-term “call” on commodities. Accordingly, we are “long” ETFs playing to our aforementioned themes, some of which are hedged.

Comments

[NOWHEREMAN:]

Buy on the rumor, Sell on the news. Or is this something new that I'm citing?

If commodities take a vicious jump to the upside later this month, will the stock market rally at the same time?

Cast your vote.

2008 Nov 04 08:44 AM

[changeisreal:]

Mr. Saut:


I thank you for some of your candid commentary on the markets. I think you lead a good group over at Raymond James

2008 Nov 08 11:24 AM