Jeff Saut Sees Tactical Bull Market, Still Cautious Near-Term

Raymond James' Chief Investment Strategist, Jeff Saut, is out with his weekly market commentary. As we pointed out last time around, he was cautious but a buyer on dips. His thoughts remain unchanged in this regard. Hedge funds also agree as they've reduced equity exposure.

However, this time around he revealed some interesting thoughts about where he thinks we are in the overall stock market cycle. He points out that according to Dow Theory, this is a bull market. But when asked if it would be tactical or secular, he replies that, "Personally I think it is tactical within the context of the broad trading range we have been experiencing since the turn of the century."

And although he makes this distinction, he can't help but pay attention to the potential warning signs flashing at him. He notices numerous similarities between the current market and the action before the April 2010 market top. As such, he is cautious in the short-term. However, he does not see another 17% decline like last year's drop in May.

Overall, Saut is still a buyer on dips (if they ever come). He is bullish on technology and specifically likes CA (CA), Hewlett-Packard (HPQ), and NII Holdings (NIHD). Additionally in the bank sector, he suggested ideas of Iberiabank (IBKC), Peoples United Financial (PBCT), and Huntington Bancshares (HBAN).

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf copy here.

For more recent research from this shop, head to the analysts' best stock picks for 2011.

Equity Risk Premium 'Exceptionally Large' & Investors Shun Stocks: Jeff Saut

It's been a while since we've checked in on what market strategist Jeff Saut has to say so let's examine his latest commentary. In his weekly investment strategy, Saut points out the high correlation in markets these days, as pair trades don't seem to be working. He also highlights somewhat of a contrarian signal in the fact that money flows out of equity mutual flows are quite gargantuan. Everyone favors bonds and 'safety' these days as retail investors haven't been this unwilling to talk about stocks since the fourth quarter of 1974. As evidenced in the chart below, investors have shunned stocks and the equity risk premium (ERP) has been exceptionally large.

(click to enlarge)

Given the increased fear and pessimism in equity markets over the past few weeks/months, Saut believes that many people are ignoring corporate profitability. He feels the S&P 500 will climb to around 1120 (current market levels) and then stall out/ pause before rallying even higher. Needless to say, this is the most bullish we've seen him in quite a while.

So, what stocks to buy? The Chief Investment Strategist at Raymond James feels that technology is the sector to be in. He likes Intel (INTC) here as the company has taken steps to gain exposure to the booming cellular market. Interestingly enough, Saut also likes smartphone plays American Tower (AMT) and Crown Castle (CCI). We actually featured an in-depth analysis of one of these companies in our brand new quarterly newsletter: hedge fund wisdom. Hedgies have definitely favored the wireless tower operators and we examined the investment thesis to take you inside the head of a hedge fund manager. Lastly, Saut also offers CA Technologies (CA) as a play.

In summary, Saut acknowledges that the economy is slowing but he thinks we avoid the dreaded 'double-dip'. Given the recent encouraging market action, Saut thinks we're headed above the early August highs of 1130 after the market pauses to catch its breath first. He would turn negative if the market found a way to break below its 50 day moving average at around 1085.

Embedded below is Jeff Saut's latest market commentary:



You can download a .pdf copy here.

For previous commentary from the market strategist, you can head to his piece on how he thinks the March 2009 lows will hold. For more theoretical and application based discussions, Saut outlined his risk management principles as well as the businessman's risk portfolio.