Yahoo Finance These indicators show no threat of recession
With earnings season coming to an end, U.S. market strategist at RBC Jonathan Golub joined Yahoo Finance to talk about his optimistic outlook for next year.
Golub, whose 2016 S&P 500 (^GSPC) price target is 2,300 (translating to a 9.5% upside from his 2,100 target for this year) bases his view on stabilizing commodity prices, an incrementally higher dollar and rates, a substantially higher earnings trajectory, and a modest re-rating of stocks.
According to Golub, with growth scarce, investors should favor secular and stable growing investment ideas over more cyclical and economically-sensitive sectors.
Why can the market continue to increase amid a slow-growth macro?
"I think the mistake that many investors make is thinking that the S&P equals GDP. And they're really very, very different," Golub said. "You want to pay up for companies that are able to deliver the growth anyway."
There's more room to run in the bull market, according to Golub. "We're not seeing inflation, we're not seeing business excess," he said. "Because you don't have those preconditions, yes, you may have slower growth. But there's a big difference between slower growth and a collapse of growth. And we're not seeing anything like that at all."
This year is on track to be the 10th consecutive year of sub-3% GDP growth. RBC forecasts for 2016 and 2017 point to a continuation of this trend, with CEOs emphasizing buybacks and expense management to boost earnings. But he also sees a higher re-rating for equities along with continued rewards for secular growers -- including new tech and health care.
