MORGAN STANLEY: THE RALLY IS NEAR ITS END
by ilene - March 30th, 2010 12:37 pm
Pragcap praises the analyst’s analyst Teun Draaisma who’s now saying the rally days are numbered. - Ilene
MORGAN STANLEY: THE RALLY IS NEAR ITS END
Courtesy of The Pragmatic Capitalist
When it comes to equity analysts Teun Draaisma is a must-read. The European equity analyst famously called for investors to sell stocks in June 2007 when the markets were flashing a “full house sell” signal. He then flipped bullish in November of 2008 as the markets were pricing in a much more severe situation than Draaisma saw unfolding. He’s one of the few investors who actually got the downturn and the upturn correct and was able to connect the dots between cause and effect. In his latest strategy note Draaisma is saying the rally has gotten ahead of itself and that we’re due to for a correction as good news becomes bad news. In addition to being bearish about 2010 (see here), Draaisma says the better than expected growth in the near-term is putting more pressure on the Fed to raise rates and will lead to tightening measures sooner than most investors suspect:
“The rally since 5-February is nearing its end, we believe. Our thesis is that good growth will lead to tightening measures and struggling equity markets this year, just like in 1994 and 2004. The recent rally was larger than we expected, and in our eyes was due to:
1) there have been no positive payrolls or Fed language change yet (we even saw some loosening rather than tightening
measures last week, with the Greek bailout, the