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Carmine Grigoli, Mizuho Securities chief investment strategist, on why he is feeling confident in the markets today, plus his investment picks.
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S&P bank in back to back quarters is historic in our next guest doesn't expect the gains this slowdown anytime soon he says -- the S&P will get 1650.
By this time next year joining us now is Carmine the goalie.
Mizuho securities.
Chief investment strategist and Carmine I was reading your most recent note tonight in I had to stop myself from going -- and putting some money it and into the markets because everywhere that you look.
You're seeing a lot of Green signs out there Green light's Green signals out there.
Why aren't you -- as wary of these market says many of our other guests have been.
Well.
Obviously F this and strong gains that we've seen that you could see a period of consolidation.
I think that basically that would present a great buying opportunity.
Keep in mind five to 7% corrections -- common impossible to predict.
I think the key is to look at the market over the course the next year and what you see is rising earnings.
-- expanding appetite for corporate equities by corporations.
As well as a mitigation of extreme risk aversion that that -- I'm almost unparalleled in the last fifty years but also unparalleled the -- involvement in this economy also economic questions and -- in places like Europe even here we have rising.
Oil and gas prices -- why are you paying attention to those more positive.
And -- data points and not paying attention to what it really is grabbing the headlines.
Well.
It is true that -- Europe this weekend likely to remain in some sort of recession.
They're fed is is it presents an an issue.
But the reality here is that people think that are likely to -- equity market in the very near term and that should see an economic recession in this country.
In not likely to see a big pullback in equity prices.
That has been the history.
The ECB has basically greatly reduce the potential for contagion.
In Europe by this massive trillion dollar infusion into the banking system.
So on all these signs I think there are some problems the -- but the reality is that as an equity investors.
You are confronting the most favorable valuations relative to interest rates.
It over fifty years.
Yeah -- you know Carmine a lot of people of the making that argument not just for a rally near term but even a rally over the next ten years.
Another thing I I think you like is the idea that there's been some massive buyback announcements.
These companies out there buying back billions of -- own shares will have a positive impact on the market.
-- this this year we expect corporations that buy back over 550 billion dollars worth of equity that's a very powerful force.
And what the corporate sector is sticking out there today is that the strong profits market profit margins.
An economy that's reasonably well and and doing better.
And they're seeing valuations extremely cheap.
With at cash positions are the highest level in over fifty years.
And this is a very powerful force this is what's been driving the equity market many of us have commented about the absence of individual investors.
In fact if you look at individual investors and you look at their mutual fund purchases you'll see that there's been a trillion dollar asset allocation shift.
Since the beginning of this bull market back in 2000 and night.
What that is indicated that there's an extreme risk aversion out there.
The corporate sector is issuing debt are at record levels and buying back 550 billion dollars with an equity what side electric.
Do like to blunt of course I think get a conventional wisdom is that the individual investor will get in my -- 141090.
He's used the term pop powerful force a couple of times.
I don't know if we we can say assigned -- -- -- but.
How much of this market rally simply -- because the market's rally and you know we look at yesterday's session.
In it feels like the underwriting is the one element that I've seen a key characteristic of rallied 2012 has been the intraday reversal to the upside.
How much of that becomes his a self sustaining self fulfilling prophecy.
Well the reality here is that if you look at objectively what you find is that the market has really acted like it has always reacted to get credit scare.
You see huge selloff as we saw late last year and when the -- move in -- to mitigate the problems the market -- That typically if you look at credit crisis he's which will find this.
After the first five months of a bull market when it's watched the market goes up about 25%.
That's exactly what we've seen -- -- So this isn't.
Mass hysteria and you know this excessive optimism -- some of -- -- It's a classic response -- the end of however cessation of fear that we've seen in.
Our -- -- we can always get front for a -- that we've got ten seconds what's the one thing that could be -- below what's your prediction of 1650 on the S&P.
Well you could see another blow up in Europe these decisions -- not totally resolved.
The banking system is desperately in need of an incremental equity infusion.
And so and that contracting -- the recession could be worth.
The reality is that I think investors are going to be able to mitigate most of -- from who you are seeing that certainly -- -- -- glass half full scenario -- a lot of people that come on this program and we appreciated on this Friday afternoon.
Carmine good goalie at Mizuho securities thanks for being with us.
