As I mentioned in my weekend video, here is an outline of what I am expecting for the 4th quarter.
1) There will be no taper at all this year. I discussed my reasons in this blog post on August 12th. Even if there is a small taper, I think it will be a non-event.
2) The S&P 500 will approach new highs and all the money managers who thought we topped in August will be forced to put money to work. Many managers are behind this year and face career risk if they don’t produce.
3) The best way to produce a return is to chase or potentially “plow into” big cap, liquid stocks. We might see stocks such as $GOOG and $PCLN move to $1,000-$1,000, the highly shorted names like $AMZN and $NFLX move to $350-$400, and the “overvalued” growth names such as $TSLA, $FB, $LNKD and $YELP move considerably higher.
4) The S&P could possibly move +5-7% from here, but individual stock selection will be more important. There has been a decoupling from the averages in many stocks over the past few months and I think it will continue into year-end.
5) We will continue to have sharp 3-5% shakeouts in the averages, mainly to keep people in check. As always, the market never makes it easy for people.
The main two things that could derail the markets would be a geopolitical event or a mess in Congress. If I’m wrong about this call, it’s no big deal because I have no ego when it comes to the stock market and I simply stop myself out to protect the downside. Good luck trading!
I can be reached at: jfahmy@zorcapital.com.
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