Abby Joseph Cohen
has something to say to everyone who thought that this cyclical rally was dead a couple of days ago: It's not, and that's not a bad thing.
That's the message the hyper-bullish
market strategist brought to the
Economic Strategy Institute's
International Trade and Economic Policy Forum. Cohen posited a direct correlation between cyclicals' strength and an event soon to be on the lips of every financial commentator, the death of the global financial crisis. She said:
It appears that the global economy is now past the worst point. U.S. investors have responded to that growing body of evidence by doing the following things: We're buying economically sensitive stocks; we're buying small- and midcap stocks; we're buying lower-quality bonds; and we're willing, once again, to look outside the United States for investment.
In other words, the recent broadening of the market is real, not a skittish and transitory flight from overvalued stocks. Asked about her 10,300 price target for the
Dow Jones Industrial Average
, Cohen put her faith in the market:
The correct conclusion is that the price targets are not right. We put our price targets together in a way that we consider to be conservative. We use earnings growth rates that I think are easily achieved. I've built in an inflation number that is double what I think is likely.
Given that model, according to Cohen, "a P/E ratio in the mid-20s is easily supported by the
The 10,300 target will stand for now. Goldman doesn't recalibrate its price targets continuously, Cohen noted. But she seems to think there are plenty of reasons to be bullish, especially with what she regards as particularly impressive earnings. She indicated a probable target raise in a couple weeks, when 90% to 95% of S&P 500 companies have reported.