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Stifel Nicolaus Managing Director Barry Bannister on the sectors to boost investors’ portfolios in the year ahead.
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In a call fiscal cliff fiscal cliff cliff in this -- -- So can I just -- -- on the equipment.
It's always seem to hear as we approach Christmas and it's holding the markets hostage will congress get its act together before year end and of course the news we just give you few seconds ago was that John Boehner.
Has left DC for his district this afternoon.
Where should you put your money to work in 2013 Barry Bannister is a managing director of steeple Nicholas -- -- bull with an S&P target.
-- take a breath every one at 16100.
-- a very great to see you -- why are you so bullish tell me what's at the heart of this.
-- I agree with -- the fiscal cliff has been a burden.
We all expect an extension a messy compromise.
We know that deficits hurt earnings and so as we look to the political solution which has been driving the economy we expect to pick up in capital spending next year as well as construction and other measures and.
Okay but what if areas.
A feeling an impression that people just don't know what's going to happen on so many levels.
What would generate them rocket fuel that would push that kind of pick up.
We all know that the political process is about evenly divided and it's created a great deal of stress in the market.
Some resolution of that stress would enable this equity risk premium that we're all familiar weapon.
The earnings yield of the S&P minus ten year yield to close its gonna close one way or the other we think it'll be a higher PE ratio.
Commensurate with -- low inflation.
And a slightly higher ten year yield.
Indicated indicating growth.
Right what will the spread on that right now is about 60700 basis points at the moment to look let's talk about the expansion in 2013.
If you're looking at the market right now which has a multiple of about fourteen times earnings that do things have more expensive and would you buy at the more expensive price.
Some of the biggest -- sectors -- the S&P.
Such as -- financials energy materials capex oriented technology some of the industrials.
Have room to increase on the PE ratio they need the economic picture to improve.
And for that we need this political uncertainty to be lifted and I agree with you it's been -- blanket on the market.
But but it's been it's been -- -- and people then we'll start to question this -- why would I go when now what I could have.
-- people have traditionally missed out on this so that's what I want you to address at the moment.
Our investor viewers you know -- them -- where -- the sectors where the areas that you really feel will participate in what you're calling for and that's a pretty decent move in the SP 500.
-- the fear trade in the defense of trade which is the utilities Staples -- health care of the discretionary.
Those have really run -- And I wouldn't chase them here I'll kind of feel like the relief leverage is what you want and that relief rally would probably come from the financials energy materials capex tech and industrials welcome financials have done beautifully this year you don't think that that's an overdone trade.
Now now they're they're coming back from dead.
We they've been our favorite group all year.
And we would expect that to continue and -- into next year with names like BlackRock and CIT and -- on.
A credit BlackRock CI TK on -- you know let me just.
Finish here with with the question that that a lot of people -- wondering about a that in essence Berry is.
Should we just believe that things will happen appropriately in DC or minus that.
Let's not ignore Europe there are still headlines that can come out of that area that could really hurt our investments apropos of nothing that a company that I might -- that has anything to do with -- We'll keep in mind that we were 1119.
When the S&P downgraded the United States data on the S&P 51119.
-- were up over 300 points since then and S&P earnings estimates are down about twelve or thirteen dollars.
The markets always gonna climb a wall of worry we've been -- bush.
I expecting re rating of equities remember if you have low inflation cash flows in the future worth a lot more so -- do have room to expand -- two and half percent inflation is the outlook.
We've said all along the greatest risk was deflation and avoidance of deflation would lift these traits that I'm talking about.
Good to see you Barry he's calling for 16100 next year -- -- we'll see you next time concede that comes true we appreciate you coming on.
Barry Bannister Stiefel necklace managing director at work and working hard with the bonds bringing a.
