Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

mercoledì 21 dicembre 2011

Market Comment - December 21

(Marco Bonelli) Go long the market until February/ March for a possible 8-9% rally in the SPX and 10-11% in the Nasdaq Composite!

The broader market might even have more upside, as the Value Line Index (VGY) has a chance to advance 11% to 363 and small-/ mid-cap stocks could see an even bigger gain (if the Russell 2000 revisits its May/July highs, it would result in a nice 16% rally).

So what happened to all the head-wind issues and what changed my mind after being cautious to negative for quite some time?

First, the gradual and sequential improvement in housing starts shows that there is really life somewhere at the end of the housing depression tunnel. Arguments that the better than expected November statistic mostly showed improvement in multi-family homes (while single-family construction remains weak) or that the total number remains miles below the long term average don't count too much as it's the slightly improving uptrend since May that worth looking at. Furthermore, it sort of broadens the base of economic growth in the US.

Second, continually positive bond auctions in Europe and sharply falling yields reduce the risk of an immediate liquidity crunch and the risk if a break-up of the system. Although European leaders have trouble agreeing on almost anything, at least some proposals have been put on the table and the almost certainty that the ECB, IMF or other institution will provide liquidity if needed, buys some valuable time.

Third, while a recession in Europe is almost certain, this topic had been discussed extensively. At the same time, business sentiment and also consumer confidence data remained relatively constructive and positive. So in terms of macro-economic trends in Europe, better than expected growth in the core countries would be an out-of-consensus surprise.

Fourth, earnings growth has been sharply decelerating which neutralized the often used argument of cheap valuation. Recent profit warnings, particularly in the technology sector (which was again famously demonstrated by ORCL's highly disappointing Q4 report last night) lead to a new round of dramatic earnings estimates revisions in the past two weeks. Earnings growth for the S&P 500 companies for Q4 is now expected to be just 6.4% (6.0% ex financials) after estimates of 11.9% (10.9%) beginning of October; this compares to the healthy 14.2% (16.9%) which was recorded in Q3. Estimates might come down even more over the next couple of weeks but chances are that estimates already have been reduced to a level where they may get beaten when the Q4 reporting season starts.

Over the next weeks, the famous head-wind issues will certainly emerge as a regular routine. Concerns in Europe, uncertainty of rating downgrades, concerns about global economic growth will stay on the radar screen, which will leave markets volatile but at least for the moment it seems that a lot of things might not be as bad as feared and broadly discussed. Therefore today's weakness resulting from new rumors out of Europe in combination with a lousy quarter from ORCL should be seen as a buying opportunity to start accumulate positions in economy-sensitive sectors like industrials, retail, technology and financials but also commodity related sectors like energy. Unless sentiment becomes excessively positive, the expected rally may last into February or March.

Trade well.

(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own)

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