Oberweis: "OOB" to Drive Stocks Higher in 2010

Newsletter guru Jim Oberweis says he thinks 2010 will be another strong year for stocks, but for different reasons than in 2009.

“In contrast to 2009, when cheap valuations drove our bullish conviction,” Oberweis writes for MoneyShow.com, “our 2010 prediction is based on OOB — ‘Out of Bonds.'”

According to Oberweis, “way too much money has flowed into bonds in this risk-averse world.” The historically bad decade for stocks and strong decade for bonds are the reason for that, he says, since most investors chase returns.

But that will change this year, Oberweis contends. “Mark our words: Inflation is coming, and owners of long-term bonds will lose money. We believe that as bond returns begin to languish, money will flow from bonds to stocks, which tend to be more resilient in times of inflation.”

“A relatively benign increase in investor appetite for stocks can make a surprisingly significant difference in stock prices, and we believe you will see it play out in 2010,” Oberweis says. He expects the S&P 500 to return more than 10% for the year. “We expect bonds to deliver losses and would recommend shorting 30-year US Treasury bonds right now,” he adds. “Bonds stole the spotlight in the non-roaring 2000s. In the 2010s, equities will regain their throne.”

Other 2010 predictions from Oberweis:

  • Higher inflation expectations in the US will put “enormous” pressure on China to allow the yuan to appreciate against the dollar, pushing the yuan up 5% or more;
  • The Russell 2000 Growth Index will return at least 12%;
  • The ten-year market-imputed inflation forecast will rise to at least 3.0% (from 2.4%) and “perhaps considerably more”;
  • Treasury bill rates will rise from 0.01% to 1.25%.

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