Weak Dollar Offset By Rising Stocks Says Jeff Saut ~ market folly

Tuesday, December 1, 2009

Weak Dollar Offset By Rising Stocks Says Jeff Saut

Raymond James' chief investment strategist is back with his weekly market commentary and this time he is focused on the weak dollar. Jeff Saut outlines that early in his career he had been concerned about a weak dollar, but then he learned a valuable lesson: stocks go up to offset it. So while some of you may be worried about the dollar for economic reasons, his argument is you shouldn't be worried from a market perspective. We do know one thing though, hedge fund icon John Paulson is worried about the dollar because he's betting against it with his new gold fund. Saut points out that a weak dollar has been very helpful to precious metals and commodities positions, a situation that plays right into Paulson's theme and strategy.

Based on the weak-dollar infused rally and the charts, Saut's team has outlined a price target on the S&P 500 of 1200 to 1250 so we'll have to see how it plays out. At the same time though, Saut points out again that we are still not out of the woods as we begin the road to recovery. They have been cautious recently in the past but have admitted they were wrong by trying to fight the trend. He quotes Lowry's services who says, "no major market top has formed without being preceded by at least several months of rising selling pressure. But, currently, selling pressure has been recording new lows in a downtrend dating from the index's peak in March. Therefore, absent a sustained rise in selling pressure, the probabilities are against the formation of a major top and favor the continuation of the primary trend higher." As such, Saut's team is playing the tape and has laid out the price targets set forth above. And interestingly enough, Saut has also exchanged a few quips with fellow strategist David Rosenberg which is in the letter below. It seems the investment industry is ripe for debate these days.

We've been posting Jeff Saut's thoughts each week and last week he was out claiming that he thinks performance chasing will propel the market higher. He attributes this to underinvested portfolio managers who have underperformed this year and as such are at risk. After all, your track record is your identity and PM's don't want to have two bad years in a row.

Embedded below is Jeff Saut's latest weekly investment strategy (RSS & Email readers click here to read it):

You can also download the .pdf here.

For more from Raymond James' Jeff Saut, check out how he thinks underinvested managers will fuel further upside and some more in-depth thoughts about what exactly the never-ending market rally means.

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