We recently had a chance to ask Covestor manager Bob Gay, head of Global Equity Analytics and Research Services LLC (GEARS), how he sees the rest of 2012 playing out for markets:
Bob’s three Covestor models are Earnings Surprise, Luxury Liner and Speedboat.
A transcript of Bob’s remarks:
We’re looking now at the prospect of a major acceleration in the performance of the stock market through the year 2012 and it’s probably one of the most important opportunities for investors to buy stocks that we’ve seen over our investing lifetimes.
Bond yields are now unusually low – in fact, long treasury bonds are at unprecedented lows – so the likelihood of bond yields declining from here is slim and in fact given a very broad acceleration in corporate profitability that’s now underway, it’s much more likely that bond yields will rise.
Generally speaking rising bond yields is an impairment of equity performance but with corporation profitability rising as quickly as it is, it’s much more likely that stocks will outperform bonds.
In fact it’s my proposition that by the end of 2012, stocks will be twenty percent higher – which will be a great year – but more importantly that bonds will be twenty percent lower, which will make the year 2012 one of the most dramatic outperformance periods of equities relative to bonds that we’ve seen in our investing experience.
