Bulls gain momentum on Wall Street

Some believe Dow will hit 12,000 later this year

As the Dow Jones industrial indexes flirted with the 11,000 daily volume mark on Monday, many investment analysts are convinced that the index will continue to rise, at least for the short term.

“The Dow is headed for 12,000 by year end,” wrote Peter Morici, professor in the Robert H. Smith School of Business at the University of Maryland in a report Monday. “Quite simply, Goldilocks has come to roost on Wall Street. For now, short rates will stay low, the yield curve will steepen but not a lot, and overall, the interest rate environment will remain very favorable for stocks. Don’t let employment figures fool you. Manufacturing, especially durable goods manufacturing, is expanding. Businesses have learned to ge4t by with a lot less labor. Manufacturing profitability should improve strongly.”

The residential construction market is improving, as is the non-bank financial services sector, Morici wrote. And while talk in Washington about increased oversight on the financial services industry, the investment banking and related industries are still booming, leading Morici to believe that the stock market will continue its steady rise.

“We may get a correction this spring, but the bull market will resume,” he said.

Milwaukee investment pros agree.

In its most recent customer newsletter, Glendale-based Sadoff Investment Management LLC wrote that the current monetary, psychological, technical and economic/business cycle environments are all positive for high potential and reduced risk in the stock market.

Bruce Bittles, chief investment strategist with Milwaukee-based Robert W. Baird & Co. Inc., is not quite as optimistic as Morici, but remains largely positive.

“The popular stock market indices continue to hit new recovery highs supported by improving economic conditions and a favorable technical backdrop,” Bittles wrote in his research note on Monday. “For now, stocks are enjoying a powerful trend and strong upside momentum suggesting the path of least resistance remains to the upside.

“A larger threat to the rally is the potential that investor expectations will soon outpace future earnings potential. In addition, the seasonal tailwind stocks are enjoying is set to expire in late April and that will usher in a cyclical headwind into the third quarter.

To read Bittles’ full report, click here.



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