More Scary Headlines, New Market Highs: Are investors finally embracing this market?

Janiczek & Company

James Callahan

Research

5 Pages

Janiczek & Company explains why strong equity performance in early 2013 can coexist with persistent economic fears, arguing that improving fundamentals outweigh alarming headlines. While expecting a near term 5% to 10% correction, the paper contends any pullback could create opportunities as housing, employment, and corporate fundamentals continue strengthening.

Key Takeaways

Economic Recovery Strengthens: U.S. GDP slowed to 0.4% in Q4 2012, yet the authors expected 2013 growth above 2.5% as housing construction remained just 35% of its long term average.
Correction Expected: After a 40% market advance over the previous 18 months, the paper anticipated a healthy 5% to 10% correction and reduced its tactical equity overweight by 5%.
Stocks Over Bonds: The S&P 500 traded at a 16.2 operating P/E versus 28.3 in 2000, while debt to assets declined to 23.8% from 36.7%, supporting a stronger equity backdrop.
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