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Citi’s chief U.S. equity strategist Tobias Levkovich was on Bloomberg TV this morning discussing his outlook for stocks. Over the long run, he identified a few catalysts that excite him about holding equities once financial conditions improve:We are in a malaise right now; I think that turns in the next 12 to 18 months. We’ve got growth coming from an improving housing environment, manufacturing competitiveness, energy developments in the U.S., and still technology. Mobility is the new wave of growth from technology.
Those are the growth factors. We’ve got new buyers of stock coming, because if you look at the 1980s and 1990s period, that was the baby boomers coming in and starting to save for retirement. The “baby boom echo” — the children of the baby boomers — are starting next year to enter their retirement saving years.
It’s bigger than the baby boom was.
Levkovich said that going into the second quarter earnings season, however, he is cautious, telling Bloomberg that “a lot of it is second half expectations,” and that while he is “less worried about second quarter results,” he is “much more worried about second half results and what companies are going to guide in the earnings releases.”
When asked for his call on where the market is headed next, Levkovich told Bloomberg:
I have great conviction for 1425 year end on the S&P. I don’t have great conviction we have a big move in the next few weeks, simply because we need to get the earnings guidance out of the way. We need expectations lowered to a level that can be met or beaten. And right now, they’re just too high.