Kass: Curbing My Enthusiasm
Written by: Doug Kass
Tickers in this article:
BCS JPM SPY
This column originally appeared on Real Money Pro at 8:40 a.m. EDT on July 3. A trading range of 1290 to 1430 seems probable for the balance of 2012.
Against the anticipated trading range above, reward and risk remain basically in balance (70 S&P points up and 70 S&P points down).
NEW YORK (Real Money) -- Strategic adjustments:
- I have slightly adjusted my S&P 500 fair market value downward from 1455 to 1430 -- the market is still about 5% undervalued.
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Changes
Let's investigate what fundamental, sentiment, valuation and political changes have occurred since my last fair market value update five weeks ago.
- U.S. Economy: Deteriorating. Domestic economic data have been disappointing relative to my modest expectations. First-quarter 2012 real GDP growth came in a tad under 2%, and second-quarter 2012 real GDP growth will be challenged to match the previous quarter. We seem destined to muddle through this year, closer to 1.5% growth compared to our previous below-consensus expectation of 2.0% growth. Payroll growth seems stuck at below-consensus levels, and the rate of growth in U.S. manufacturing activity is decelerating at a more rapid pace. On the other hand, some major positives for worldwide growth include global easing, the drubbing in commodities (a tax cut to the consumer and a prop to corporate profit margins, which argues in favor of an extended period of easing) and the improvement in the U.S. housing market (the sector represents the greatest divergence in economic series relative to consensus). Business and consumer confidence, which was still elevated as recently as last month seems destined to drop in the months ahead amid EU concerns and U.S. political concerns (the fiscal cliff).