With the S&P 500 index having tripled in the last six years, now standing just 1 percent below its record high, many analysts see a major drop coming.
But not Jeffrey Saut, chief investment strategist at Raymond James. He tells Barron's
the index might double to 4,300 within nine years.
"We are in a secular bull market," Saut argues. "I have seen this play before, and secular bull markets tend to last somewhere around 14 or 15 years. And they tend to compound at a double-digit rate. So, if we are six years into this bull market, it figures there is probably another eight or nine years left. If you compound forward at double digits, you come up with 4,300 for a price objective on the S&P 500 some time in 2023 or 2024."
As for the near term, "the second quarter, from an economic standpoint, is still going to be a little squishy," he notes. "But the underlying economy is actually stronger than the surface figures suggest. I expect to see stronger economic numbers coming out in the third and fourth quarters." The economy shrank 0.7 percent in the first quarter.
Saut thinks the S&P 500 will reach 2,250 by year-end.
Therefore, he believes investors should put their money in stocks. "Stocks are the best place to be, especially dividend-paying stocks. Those companies, especially the ones that have increased their dividend by 10 percent or more forever, make a lot of sense in this climate."
As for another legendary market figure, former Fidelity fund manager Peter Lynch, MarketWatch columnist Jeff Reeve
s says one of his famous ideas is wrong.
Lynch has recommended that investors who enjoy using certain products and see others enjoying those products should consider buying the stocks of the companies that make them.
"The idea is folksy and simple: keep your eyes open as a consumer, then invest in the companies that you see doing lots of business," Reeves writes.
"But with due respect to Peter Lynch, this strategy of buy what you know is harmful. It's not a bad sentiment and perhaps useful as a starting point, but buying a stock because you use its product? That's the worst idea ever."
The problem: "it's naive to assume that simply because a company makes money selling hot dogs, and because it's selling lots of hot dogs right now, that it's a great investment," Reeves says.
In fairness to Lynch, he did indeed stress that the idea serves only as a starting point. You should thoroughly research a company's finances and make certain it's on a solid path to profitable growth before buying.
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