April 18, 2012

Nomura’s ‘Bob the Bear’ Turning Bull?

‘Monetary anarchy’ wreaking havoc, but will help in near term

Is “Bob the Bear” turning bull? Appearing on Bloomberg T.V. on Wednesday, Bob Janjuah, global head of tactical asset allocation at Nomura International Plc, clarified his recent estimates that a rally in equities will extend into next year and the S&P 500 will hit 1,500 in the coming months.

“It’s a short-term tactical move reflecting the current monetary anarchy,” Janjuah said. “We believe we’ll see a 10% selloff of equities in Q2 and the S&P will be somewhere in the low 1,300s or high 1,200s.”

However, he added that a rally will occur in June or July as a result of some sort of Fed “twist,” a term that refers to the policy of selling hundreds of billions billion in short-term Treasuries in exchange for the same amount of longer-term bonds. The results from such a move could be felt into the election.

As for the longer-term outlook, Janjuah sounded much like his usual self.

“Global growth, including U.S. output, is not yet self-sustaining, and we’re headed for the fiscal cliff,” he said. “A longer-term secular call still holds and we have the S&P targeted for 800 with the Dow down as well.”

Using the S&P as his benchmark, Janjuah also said Europe would underperform for “the next month or so.”

When questioned about PIMCO’s prediction, and others, that the next monetary action will be a full quantitative easing, not a “twist,” he said the Fed “understand that the outright printing of money” sends a negative signal to the markets and raises commodity prices.

“If gas in now going for an average of $4.07 a gallon and it gets raised to $4.50 a gallon, that will stop the American consumer dead in their tracks and make it very hard for the president to get re-elected.”

When challenged as to whether he felt the Fed is playing politics with quantitative easing and commodity prices, Janjuah said it was “naïve” to think a central bank in a given country is not watching and influenced by what’s happening in the political arena.

“I think that’s just common sense,” he concluded.  

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