The dominant trade of 2010 shall continue pronounces Raymond James strategist Jeff Saut:Well, I’m on the road again this week speaking to PMs and conducting retail investor seminars. My message remains pretty simple. With more quantitative easing (QE2) on the way, the risk of another downdraft in housing has been taken off of the table. It has also boosted commodities, which is plainly good for our “stuff stocks.” Additionally, QE2 should spur more M&A activity, increase share repurchases, and lower the U.S. dollar (good for export companies), all of which is positive for the S&P 500. Speaking to the weaker dollar, since the rally began in July the SPX is up roughly 13%. Meanwhile, the Dollar Index is down ~13%, causing one old Wall Street wag to lament, “Is the stock market going up, or is the ‘measuring stick” (aka the dollar) going down?” And this is why you want to have your depreciating dollars in productive asset classes that throw off cash flows, and hopefully keep up with the inflation, which unless the laws of economics have been repealed is surely coming.
It makes sense. It also lends more to this idea that we’re on the verge of a monster sell-the-news slump once QE actually begins.