Barron's interviews Seeking Alpha contributors prolific Paul Hickey and Justin Walters - founders of Bespoke Investment Group. Based on a variety of measures and home-cooked indicators, the deep-data researchers say they're cautiously optimistic that the bottom is in - and see signs the current rally may have legs.
Some key datapoints:
- It's looking more and more like the yield-curve peaked last fall, especially after March 18 when the Fed announced its plan to monetize Treasurys. Historically, this is a good sign for stocks.
- When consumer confidence hits record lows, as it did recently, stocks are almost always higher 6-12 months out.
- Prior bear market rallies were led by defensive sectors like energy and telecom. This time around, financials and tech are leading the way.
- Emerging markets are making a break; China's up 30% YTD and Brazil is up 13%.
- Markets have posted 12-year negative trend returns only two other times, and both were buying opportunities.
Stocks they like:
- MasterCard (NYSE:MA) - unlike American Express (NYSE:AXP), it has no credit risk. They favor MA over Visa (NYSE:V) because of its cheaper 16x valuation.
- Archer Daniels Midland (NYSE:ADM) - a play on a weak dollar, which should boost agricultural commodities.
- Altria (NYSE:MO) - is recession-resistant and yields 7%. With state governments generating about $2.50/pack in taxes, no one's going to kill this golden goose.
- Intel (NASDAQ:INTC) - with 15% of its market cap in cash, its 3.55% yield is one of the safer ones.