Where Do We Go from Here? Sonders, Yardeni & Others Weigh In

With the market continuing to surge, SmartMoney.com recently surveyed a number of top strategists to see just how much room they think stocks have to run, and found a good deal of optimism that was tempered by caution.

Among the strategists: Charles Schwab Chief Investment Strategist Liz Ann Sonders; Yardeni Research President Ed Yardeni; and Bespoke Investment Group Founder Paul Hickey. Here’s a sampling of what they had to say:

Sonders: “The train has been leaving the station for many indexes, and investors don’t want to be left on the cash platform,” Sonders said. She says investors are putting cash into just about anything, including higher-risk bond sectors, emerging markets, U.S. stocks, and commodities. “It’s been my strong view that a lot of what we’re seeing is ‘capitulation in’ vs. the ‘capitulation out’ that tends to occur as bear markets are ending,” she said. “I don’t think we’re finished with that process, but it won’t last forever.”

Yardeni: He thinks the market will be range-bound for another month or so, though he adds that second-quarter surprises could give the market a boost, SmartMoney says. “Sideways could still be the direction for the stock market over the rest of the summer, before it heads decisively higher again, as I expect,” he said.

Hickey: He says earnings are key to the market’s continued gains. If corporate earnings keep up their strong trend, the market should continue its gains through earnings season.

Jeffery Saut, Raymond James chief investment strategist: Saut says one interesting byproduct of the recession is that productivity has increased as firms have cut costs. That is setting things up for stronger, more sustainable gains later this year — not just gains based on emotions or technicals. “The implication is that if demand picks up, the earnings rebound in the back-half of this year could be a lot stronger than most expect,” he said. “And that, ladies and gentleman, could be the carrot in front of the proverbial horse.”

David Rosenberg, Gluskin Sheff chief economist and strategist: He doesn’t see much of a fundamental case for gains. “Friends, this is a faith-based rally, pure and simple,” he said. “And, as powerful as it is, this rally to new post-Lehman highs is being driven primarily by the technicals. Momentum is extremely strong at this time, and this often exerts a self-perpetuating move in the market, and in both directions.” He recommends keeping a close eye on valuations and forcing yourself to lock in gains when momentum reverses, SmartMoney reports.

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