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May 7, 2019, 9:56 a.m. EDT

One of Wall Street’s biggest bulls is looking well past the trade drama

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By Barbara Kollmeyer, MarketWatch


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Bulls eyes on this stock market

The good news? U.S.-China trade talks are still happening and Beijing’s top negotiator, Vice-Premier Liu He, is expected to attend talks this week in Washington.

The bad? A Sino-American trade resolution looks unlikely by Friday, with an increase of tariffs all but assured. That’s because White House officials confirmed an intention to raise import duties on Chinese goods, first communicated by President Donald Trump over the weekend via a series of tweets. U.S. officials say that Beijing attempted to renege on some trade promises, which likely prompted a renewed animus from Trump.

So far, the glass-half-empty crowd looks ready to push U.S. stocks lower again on Tuesday, though it’s worth noting that Monday’s trade action, which featured a powerful rebound toward the end of the session, may suggest lingering optimism on Wall Street.

That optimism provides an apt launching point for our call of the day from Jonathan Golub, chief U.S. equity strategist at Credit Suisse.

Golub, in an interview with MarketWatch on Monday, said that his upbeat outlook for equities remains undeterred by recent moves. The strategist says his current year-end target of 3,025 for the S&P 500 seems rather tame. It “seemed so bullish, and now it seems so conservative,” Golub said. The Credit Suisse analyst had begun the year with a 3,350 last year, but slashed it to 2,925 during December’s volatile market action. Who can blame him?

“We think stocks are going to continue to deliver over the next several years — high single digits or better returns,” said the strategist, who adds that he’s “very comfortable” with their current S&P forecast for 2019.

His upbeat equity outlook looks past the vagaries of U.S.-China trade talks and focuses on the meat and potatoes of this market: the economy. “The real key here is that we have an economy that is healthy and creating a ton of jobs,” he said, adding that well-contained inflation will likely the Federal Reserve from turning more hawkish on policy.

On top of that, first-quarter earnings turned out better-than-feared, he adds.

As for trade negotiations, Golub said investors should probably eschew near-term headlines coming out of Washington and Beijing in favor of the possibility of long-term benefits from a bona fide trade accord with China.

“I think the feeling among investors anything that causes any near-term pain is inherently bad, but it’s very possible that as a result of this we’d end up with more open access to Chinese markets in the long run, and a better situation for intellectual rights,” Golub said.

"And if those are the outcomes, then yes, this will increase volatility for a period of time, but it’s possible the results here are positive ones,” he said.

As for those waiting to “buy-the dip” in stocks, Golub sees that as a bit of a flawed strategy. “I think all the people who are waiting to buy on a dip this year, a lot of them waited too long. The market is very attractively valued, and the economy is in good shape and corporate profits were fine.”

Read: Stock-market strategist says Wall Street should shake of Trump trade anxieties and ‘buy this dip’

Some bearish strategists say that the stock market’s relentless rally since its Dec. 24 means that there is not more room for equity indexes to climb much higher.

Golub, however, has another way of thinking about the rebound from off that late-2018 rout.

He said investors should consider that the S&P 500 as trading around last September’s levels, meaning it has pretty much drawn even. With that in mind, “we’re roughly flat for seven months, and that’s a better way of looking at it then saying markets are up 20% since December,” he said.


FactSet

And the stocks they like? Golub points to tech plus — i.e., technology stocks plus communications services stocks and internet — but says he’d probably avoid some parts of the economy that are most economically sensitive, such as industrials and metals stocks.

The market

The Dow /zigman2/quotes/210598065/realtime DJIA +0.63% , S&P 500 /zigman2/quotes/210599714/realtime SPX +0.29%  and Nasdaq- /zigman2/quotes/210598365/realtime COMP +0.53% are all trading lower at the start. Read Market Snapshot for more

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
30,070.71
+186.92 +0.63%
Volume: 262.13M
Dec. 3, 2020 3:12p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,679.52
+10.51 +0.29%
Volume: 1.75B
Dec. 3, 2020 3:12p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
12,414.96
+65.59 +0.53%
Volume: 3.88M
Dec. 3, 2020 3:12p
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