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Joe Heider of Rehmann Financial and Stifel Nicolaus portfolio manager Kevin Caron discuss their outlook for the markets.
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You Nicole but the averages are down this afternoon but stocks hovering near their highest level ever -- the bulls keep on right.
We've got John Hyder from Raman and Kevin -- -- Stiefel Nicholas gonna talk about this.
So basically Kevin you're the big bowl here -- Joseph you're the bigger bull let's start with the -- -- tell me what you like but telling what's bothering you about it.
All right.
Essentially coming into the year.
What we like with the fact that the fundamentals seem to be getting better underneath market in terms of the economy do you think that valuations are reasonable particularly compared to bonds.
And our target for the S&P was somewhere between 151516100.
By the end of the year.
In our base case which is the economy continues to expand this year so we like that the market fundamentally.
We do recognize that markets gotten gotten maybe a little bit ahead of itself in the short on January is very good.
You have a lot of -- inspired buying of risk assets through the fall into this spring so we wouldn't be surprised to see a little bit of a pull back.
And the fact that earnings growth is essentially flattened out I think gives an advantage to companies that are.
Growing may be more slowly but also consistently so that'll cut our focus going into the year.
Alright Kevin.
SMP it's not around 15100 season that 1515 to 16100.
But Joseph you say we start the bidding at 16187.
-- 800 by year end go ahead.
Well I believe that in all even though the recovery is plotting along -- will continue to plod along we're looking net earnings in the S&P -- third.
Thirteen and a half which.
Compared to the incredibly low interest rates were.
We're in right now who tells us that there's a lot of room to grow and if you look at the data points coming in.
Whether it's corporate earnings employment numbers.
Construction numbers.
GDP.
Which is -- -- now for the fourth quarter we think that all points to a very.
Big -- in the equity markets certainly it's not a straight lying.
And we are gonna have some pullbacks we just think it's very difficult to timing exactly when those are going to occur.
OK you know Kevin here -- sites of that real economic data.
Yeah and did he appears to believe that this recovery is for real and that stocks reflect that.
Are you concerned Kevin that stocks are disconnected from reality the economy actually blows and stocks are going up anyway.
I think to a certain extent we define who we -- define what reality is because remember.
So much of this recovery of the last four -- five years -- pushed us into unchartered territory.
You've never had a situation.
In recent history where you've had such a large deficit in -- in the public sector financing.
-- a rebuilding a balance sheets in the private sector which include corporate profits.
Yeah -- to go into the year.
The house is not on fire anymore the financial markets have stabilized the state of the union talked all about improving economy.
And he gets harder to run those deficits as -- -- evidence mounts that the economy's getting better.
So ultimately as we go through the year at this debate about.
Bringing in those public deficits could weigh on the private sector and might.
Further flatten out or even injure profits if it's not done the right way so I think it's important watch that it is still a risk factor that you have to have to think of.
Now yeah and Joseph yet we keep overcoming every stumble I mean the fourth quarter GDP comes out -- decline I thought -- worry about the recession -- not at all stocks still going up.
How much and so stocks rise -- is because things are so good.
Vs just because.
Three crises are off the table Europe China US government shut down.
I think it's a little -- -- I think if you look around what are the alternatives.
You know basically 0%.
Interest rates.
In the short term 2% on the ten year I think that's part of -- us.
But I think that.
We are fundamentally strong they're certainly are risks factors and I'm not suggesting there isn't.
I look at -- almost the other way and that is if Washington can get out of the way of our economy -- and free enterprise I think it's a positive.
Assuming they don't screw up as as they.
Begin to with would drop public funds from the private sector against the nature of the beast there my friend the real quick joke it since your extra bullish where what I put extra money right now -- sector to.
I like emerging markets.
We I think that they are particularly up.
Well positioned for the US investor and I do think because of our trade deficit.
Or are borrowing.
Deficits.
You know the US dollar weaken I think the we favor large caps over small caps.
All right thanks very much Joseph -- and Kevin -- -- we appreciate you being here today Q do you.
