Yellen gives the green light for more stock gains

Fri Jun 20, 2014 11:00pm EDT
 
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By Luciana Lopez and Jennifer Ablan

NEW YORK (Reuters) - Federal Reserve chief Janet Yellen signaled that rational exuberance is just fine.

That, at least, is how some of America's largest money managers interpreted her comments on Wednesday suggesting interest rates will remain low through 2016.

It reinforced their views that easy money means the U.S. stock market rally has further to run despite notching a series of record highs already this year. That could easily put the S&P 500 benchmark on track to surpass 2000 for the first time, and to do so well before the end of the year.

Such a gain for 2014, after a 30 percent rise in 2013, would surprise those who worried that stocks might be getting overvalued and were due for a sizable pullback.

One reason for increasing confidence is that the resilience of the market has been very strong in the face of various shocks this year. A combination of an improving economy, rising earnings, and the cheap borrowing costs, has made that possible.

Stock investors have shaken off last year's budget uncertainty in Washington, a sharp drop in high-growth technology companies and biotech shares, the conflict in Ukraine, and more recently the apparent tearing apart of Iraq that resulted in a spike in oil prices.

"What I have is a sweet combination of a self-sustaining, long lasting economic expansion joined with a long-lasting monetary accommodation," said Steven Einhorn, vice chairman of Leon Cooperman's hedge fund Omega Advisors Inc, which has $10.5 billion in assets under management.

"I don't think this bull market is over," he said, adding he estimates stocks could rise another 3 to 5 percent this year.   Continued...

 
U.S. Federal Reserve Chair Janet Yellen holds a news conference following two-day Federal Open Market Committee meeting at the Federal Reserve in Washington June 18, 2014.  REUTERS/Jonathan Ernst