mkt should have another 5%rally

oldpigwang

Bianco
Jim Bianco thinks the stock market is living on borrow time. Giving his outlook for the rest of 2012, the president of Bianco research says stocks "might have another 5 to 6% to go and that's on the topside." He has two main reasons for his relative gloom: The end of stimulus and rapidly shrinking earnings.

"It's a QE world," says Bianco, referring to Quantitative Easing. "All the Central Banks in the world are printing money."

By the account of many, including Bianco, cheap money in the form of artificially low rates has been the main driver of solid global stock performance over the last three-months.

"There are signs (easing) is coming to an end, if so the rally goes way," he predicts.

Bianco is unswayed by the argument that election years typically mean less action from the Fed. Despite the fact that the Fed hasn't made radical moves in election years since George H.W. Bush, Bianco says 2008 proves the Fed is unswayed by political pressures.

Regardless of whether or not the the election sways their actions, Bianco says the Federal Reserve is hamstrung by inflation figures. Noting that Personal Consumption Expentures are approaching the unofficial 2% ceiling, he says there's an "argument for not tightening, but rather less stimulating."
As for earnings, Bianco doesn't believe they're as great as some believe. Corporations are beating estimates at a 60% rate so far, but that's far below the mid-70% average level, and near the lows of the last 10-years, comparable to the 58% of companies exceeding analyst expectations in 2008.

Even more daunting for the bulls, Bianco says the real growth rate of S&P500 is far below the published 9%. If you exclude AIG (AIG), which is coming off a $16 billion loss last year, earnings are expanding at a mere 3%. Not exactly supportive of an expansion in the low double-digit market P/E.

No stimulus and shrinking earnings. Is Bianco in tune with reality or a gloom-spewing bear? Let us know your thoughts in the comment section below. Please note, there are more than the 2 suggested opinions.

ppteam

the longer market holds at current level, the more likely it will breakout up again.