Andrew Smithers is expecting a “significant rally” in US stocks which will provide an opportunity for investors to sell before equities resume declines.
Companies are cashed up and likely to buy back shares at a time when price-to-earnings ratios are low, providing a trigger for a short-term rally. Smithers had previously claimed stocks were overvalued in 2000 before a near 50% decline over 2 1/2 years. Even after the recent rout, U.S. stocks are about 40% above fair value, the president of research company Smithers & Co. said in an e-mail on Aug. 18.
The full article is worth the read, but here is the money quote:
“There is a good chance of a rally because of the cash position of U.S. companies, their tendency to buy shares when they have high cash ratios and the importance of company share buying on the stock market. A 10 percent rally would be an opportunity to sell.”
I concur . . .
Smithers Sees ‘Significant’ S&P 500 Rally
Bloomberg Aug 22, 2011 2:20 AM ET