Bulls Will Run for the Rest of 2015, says Wells Fargo's Gina Martin Adams

October saw the S&P 500 rise almost 8%, and with an unimpressive earnings season behind us, the Wells Fargo Securities equity strategist sees the upward momentum continuing.
By Gregg Greenberg ,

It was open season on stock market bears in October as the S&P 500 rose almost 8% last month. Gina Martin Adams, equity strategist for Wells Fargo (WFC) - Get ReportSecurities, said the bulls will likely continue to stampede throughout the rest of 2015 because seasonality favors stocks, and this past earnings season probably was the worst of the worst for this cycle.

"It looks to us like oil prices are stabilizing, and that's been the predominant reason why stocks have really struggled this year," said Adams. "As long as oil is stabilizing, earnings will probably get better heading into next year, and you don't want to fade that earnings recovery."

Health care stocks were the market's leaders in the first half of the year, but crumbled in the third quarter over worries about biotech valuations and drug pricing. Adams said she recently downgraded the health care sector to market-weight after four years at overweight.

"We see tougher comparisons heading into next year, earnings growth rates will slow," said Adams. "And the policy environment starts to come to the center of the discussion again for health care."

Adams is far more bullish on consumer discretionary and technology stocks heading into the holiday season because of their revenue growth, as well as margin expansion.

"The discretionary companies are the center of attention right now in the index and we think that is going to continue to be the case in 2016," said Adams.

On the flip side, Adams said she is maintaining her underweight in financials, even though many strategists say that financial stocks must lead in any bull run.

"We think that financials are over-owned and expectations are too high with respect to financial sector earnings," said Adams, adding that a flatter yield curve will not help the banks.

Finally, Adams said the stronger dollar will not undo the rally as long as it moves higher "in a slow pace."

Loading ...