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Barry Knapp thinks the Fed is out of ammo in an environment of lackluster economic growth and sees the S&P 500 sinking to 1200 sometime this summer.Knapp, the head of U.S. equity strategy at Barclays, was a guest on Bloomberg TV this afternoon.
“The broader trajectory here is that growth is deteriorating,” he said.
Many analysts have argued that economic weakness would be bullish because it would encourage the Fed to unleash more stimulus. However, Knapp said that “stocks won’t be in a position to rally irrespective of what the central bank does” given the current reality of weakening economic growth.
Knapp’s S&P 500 call: “I have us going to 1200 around about the end of July or early August.”
But it’s not all bad news — for equities, at least — if things turn out like 2010:
Then, the way things are shaping up in terms of the public policy outlook, this could be very much like 2010. We have that flirting with deflation, double dip type scenario. The growth outlook starts to stabilise — in part because energy prices have come down — and creates a little bit of a windfall for consumers.
So, at least the growth outlook stabilizes. Then, we have optimism related to the elections — we’re going to be able to resolve our tax issue, our entitlement problem, debt sustainability. We rally through the elections, much like 2010.
Knapp said recently that if the rally is anything like the 1980 rally, then it may be a great opportunity to buy stocks.