Reluctant bulls key for Birinyi after S&P 500 reaches record

Defensive Stocks

Health-care stocks and consumer staples shares leading the rally also signal the advance in the S&P 500 may slow, he said.

“You don’t usually see defensive groups leading the market to all-time highs,” Kleintop said. “What that suggests is that the rally may be getting a little tired. We might see something like we’ve seen in last few years -- a pullback starting in April.”

In the four years since the bull market started, the S&P 500 nearly entered a bear market twice, losing 16% over two months in 2010 and 19.4% in about five months in 2011. Both declines began in April. It recovered both times as the Fed committed more quantitative easing to boost the economy.

The benchmark index for American stocks ended the first quarter with a gain of 10%, its best performance in a year. Stocks will continue to advance as investors who previously shunned shares capitulate and buy, Birinyi said. He predicted in January that the S&P 500 has a more than 50% chance of climbing past 1,600 this year. The U.S. equity benchmark would have to climb almost 2% to reach that level.

More Gains Predicted

The average year-end prediction of 17 Wall Street strategists surveyed by Bloomberg is for the S&P 500 to hit 1,583. The gauge’s advance since 2009 already exceeds the average bull-market return of 120%, Birinyi data show. Two of the last nine cycles have rallied more: the 302% gain in the 1990s and 229% in the 1980s, the data show.

The S&P 500’s record comes about three weeks after the Dow Jones Industrial Average exceeded its previous high on March 5. The 30-member gauge has advanced 2.3% since then, led by Hewlett-Packard Co. and Boeing Co.

While investors poured $14.1 billion into equity mutual funds last month, the amount compares with $20.2 billion added to bond funds, data from Washington-based Investment Company Institute show. More than $600 billion was drained from stock managers in the six years through 2012, the data show.

Wyndham Worldwide Corp., CBS Corp. and Tenet Healthcare Corp. are among six stocks that have added more than 1,000% since March 2009. For 2013, Netflix Inc. has gained the most, more than doubling since the start of the year, while Best Buy Co. and Hewlett-Packard are up more than 67%.

“I have not seen the kinds of things that would trouble me,” Birinyi said. “When I start seeing people talking about S&P 2,000 or buy more Netflix after it’s up that much, then it starts to trouble me.”

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