Brian Belski is out with his first research call as the new top U.S. equity strategist for BMO Capital Markets.Bottom line: despite expectations for volatility in the near-term, investors should be disciplined and be bullish at least in the medium-term.
From his note to clients this morning:
We believe tailwinds persist that will ultimately drive US stocks into the next fundamental secular bull market. However, in the interim our models suggest there is a very good chance stocks will struggle to exceed their established highs for the year. Therefore, we are introducing a 2012 S&P 500 price target of 1,425, with an earnings target of $101.25. We believe investors should focus more on active stock picking strategies as opposed to more passive or indexing strategies within portfolios in order to generate outperformance.
Here’s how he got to 1,425:
Photo: BMO Capital Markets
Belski is concerned by the lack of investor conviction in the markets.
However, we believe that broader investor appetite for equities remains more apathetic than not, particularly considering mutual fund flow trends over the past several years. These trends have suggested to us that the believability and faith for equity investing remains quite low. In fact, it appears investors are basing investment decisions more on emotion rather than analysis lately. For instance, recent market trends have become increasingly bifurcated, alternating between “risk-on” and “risk-off” sentiment, which in turn has been fuelled by investor fears of either 1) missing out on periods of market strength or 2) preserving capital during periods of market weakness.
But he believes the U.S. is the best place to be when it comes stocks.
[W]e firmly believe US fundamentals are positioned to provide global leadership for the next several years and as a result, those investors who maintain a disciplined and process- oriented approach to fundamental analysis during periods of potential volatility will most likely be the ones who benefit the most.
Belski is considered a bull on Wall Street. While he was at Oppenheimer, his year-end target on the S&P 500 as 1,400.