Kass: Leave the Bonds; Take the Equities
This blog post originally appeared on RealMoney Silver on May 18 at 7:24 a.m. EDT.
"Leave the gun; take the cannoli."As we approach the summer, a potential setup to the upside exists after the current correction runs its course.
-- Clemenza (Richard Castellano), The Godfather
From my perch, the proximate cause will likely be based more on supply and demand rather than a function of a variant and more positive view of emerging domestic economic growth or an improving corporate profit picture. I see the onset of a potentially meaningful asset reallocation trade (by our country's largest pension plans) out of fixed income and into equities.Over the past 18 months, many large pension plans have moved a disproportionate amount of exposure into fixed income, owing to the outperformance vis-à-vis stocks. With bonds likely to remain under continued pressure -- the yield on the 10-year U.S. note is now comfortably above 3% and nearly 100 basis higher over the past five months -- and stocks having seemingly made an important (and perhaps) generational bottom, pension plans could become the catalyst marginal buyer that would spur stocks toward my longstanding (well, at least for two months!) 1,050 S&P 500 target by late summer. Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.
Know what you own: Some of the most active stocks during Monday's midday trading include Bank of America (BAC), Citigroup (C) Direxion Daily Financial Bear 3X Shares (FAZ), SPDRs (SPY), Direxion Daily Financial Bull 3X Shares (FAS), Ford (F) and Financial Select Sector SPDR (XLF).
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV