Market Resilience and a Cautionary Message for Underinvestors
All-time Highs Predicted for the Year Ahead
As market resiliency continues to surprise investors, Wall Street veteran and market strategist, Jeff Saut, sits down with Yahoo Finance’s The Ticker to discuss a stock surge as oil rebounds from a historic plunge.
In response to a direct question about the reasons behind current market resiliency, Saut discusses a couple of different, but motivating factors.
“It looks like we’re going to see a regime change in north Korea. We are past peak on the virus. The hospital boat that was docked in New York has been sent back to Virginia. And earnings reports are pretty good,” Saut replied.
Saut continued by saying that his firm called the downturn in mid-January, and called the bottom in mid-March. “We’ve had about a 31% rally, from intra-day lows to intra-day highs, since then, and I don’t think the lows are going to get retested like everyone is talking about. I think next 12 months will bring all-time highs.”
Oil and Gas Sector
With investors spooked by oil and gas sector activities the past week, The Ticker asked Saut why we’re not seeing a bigger reaction to oil in broader markets. He replied with thoughts on a couple of contributing factors.
“We’re not seeing a bigger reaction in the markets because the May contract ended yesterday, and you either had to take delivery, or sell the contract. Delivery can’t be taken because pipelines and storage facilities are full; there’s nowhere to put the oil. The result was a crash.”
Saut emphasized that he’s been in the industry over 50 years and has never seen anything like this in the crude oil futures market.
Energy Sector Possibilities
In discussing the possibilities for a rise in energy sector bankruptcies, as well as investment opportunities, Saut revealed that he is currently buying midstream master limited partnerships. “I’m buying these because they have no price sensitivity to crude oil, and they’re more concerned with volume through the pipelines and are the cheapest they’ve been in years,” Saut stated.
Despite the fact that earnings are showing some signs of economic pain, Saut expressed positive projections for the year ahead.
“Most companies beat their earnings estimates,” Saut reminded the audience. “I think earnings are going to be better on the back-half of the year, and that people are woefully underinvested.”
Finding Opportunity, and Thoughts on the Bond Markets
In closing, Saut shared that he now owns Chevron – the best name in the big cap energy group. He also expressed disinterest in fixed income offered by the bond markets. “I think interest rates are going to go higher, so there’s no interest in fixed income for me.”
View the full video here:
Highlight: "I've been in this business for 50 years and I've been looking at markets for 56 years - I have never seen anything like what happened yesterday in the crude oil futures market," @cwp_advisor's Jeff Saut. But adds that he's seeing some opportunities in the space: pic.twitter.com/GlEUwwwMqE— Yahoo Finance (@YahooFinance) April 22, 2020