Jeff Saut: Underinvested Managers & Performance Chasing Fuel Further Upside ~ market folly

Tuesday, November 24, 2009

Jeff Saut: Underinvested Managers & Performance Chasing Fuel Further Upside

Raymond James chief investment strategist Jeffrey Saut is back with his weekly market commentary. This week he takes a look back at their call many weeks ago to be cautious in the markets given that they felt things were melting up and were due for a pullback. He questions that call and wonders if they made a bad decision. Saut then goes on to note that he thinks the upside in markets actually continues.

In Saut's commentary last week, we noted hints of him 'giving in' to the rally and that many other portfolio managers were doing the same. Saut sticks with these thoughts again this week as he thinks the upside will be driven by a few factors. He mainly cites game theory in that under-invested portfolio managers have to get into the markets in order to catch up to their benchmarks before year end. Many managers right now have 'bonus risk,' and then ultimately 'job risk' as they can't be underperforming the markets after the large rally this year. So it seems he thinks the market melt up will continue based on performance chasing and cash on the sidelines coming back into the market.

In the end, Saut does not want to see the S&P 500 fall below 1083 as that would ultimately shift his view. He ends his note by mentioning the seemingly overlooked fact that the Japanese stock market is certainly breaking down now; something definitely worth paying attention to.

Embedded below is Jeff Saut's investment strategy for the week of November 23rd, 2009 (RSS & Email readers come to the blog to view it):

You can download the .pdf here.

Check out more of Saut's investment strategy where he examines whether or not this is the beginning of a new secular bull market as well as some of his past market commentary.

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