Jeff Saut of Raymond James says the Super Bad Committee’s decision won’t make a dent in real spending in the coming year. He says the markets are overreacting to the news and that we should remain bullish for these 6 reasons (via Raymond James):
“The call for this week: Last Friday CNBC’s Maria Bartiromo asked me what was going to happen with this week’s Super Committee decision? After jokingly responding that if past is prelude if the Super Committee doesn’t arrive at a decision they will appoint a SuperDuper Committee, I then stated, “I don’t think the Super Committee will reach a consensus.” I also opined, “I believe there is a wink and a nod between President Obama and Speaker John Boehner to not implement the mandatory ‘cuts’ and let the 2012 Presidential election resolve the debate between increased taxes and spending cuts.” Quite frankly, I don’t know of any member of Congress that will stand for major military base closings in his (or her) state. Meanwhile, earnings continue to surprise with S&P 500 earnings up ~22% y/y, while revenues improved ~11.7% y/y. Such reports make it increasingly uncomfortable for the underinvested crowd; and the world remains profoundly underinvested in U.S. equities. Accordingly, I think stocks will continue to grind higher, provided we don’t talk ourselves into a recession. The reasons for that view are: 1) underinvested portfolio managers playing “catch up” (read: performance anxiety); 2) the upside seasonal bias; 3) low stock valuations; 4) improving economic trends; 5) still depressed sentiment readings; and 6) the knowledge that we have now entered the best performing six months of the year for stocks. Consistent with this view, I think the buying of inexpensive beta makes sense. “
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