Author: Gehman Capital
Covestor model: Undervalued Growth Companies
Many of the factors that I said were going to affect the market in my last report have happened. The world economies are starting to respond to the record amounts of liquidity supplied by global central banks.
The European Community is in the process of helping Greece work out of their problems. I believe the EU will also help other countries as needed.
The US banks are reporting that their financial conditions have improved significantly. The European banks now have access to three- year money at a low cost that will help them get through this slow economic cycle.
As I have noted in recent reports, I believe that 2012 will be an exciting year for US equities. (Note: I do not specialize in European equities, but some analysts say they are cheaper than US equities.) Individuals are earning very little money on their savings. I believe they will start buying relatively secure dividend stocks. As the markets stabilize, institutions that are sitting on gigantic amounts of cash will also start investing in equities. I believe the small and large cap stocks in my Covestor portfolio will be much higher by year end.
To be sure, we could experience a sell off that would fill in the gaps, but I don’t think that it will be a serious decline because there is too much money on the sidelines that would like to buy at lower prices. I believe that it is more likely that we enter a period of consolidation before the market goes back to the “rally mode.”
