Stock Market Watch

Equity Markets to See Inflows With or Without Sequester: Analysts Tell CNBC

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Whether lawmakers in Washington reach a compromise during budget talks and avert  series of automatic spending cuts or sequester estimated at $85 billion or the political brinkmanship eventually results in budget cuts from March 1, analysts are confident that money will keep flowing into equity markets in 2013, according to CNBC.

While speaking to CNBC, Robert Luna of SureVest Capital Management said although rapid inundation of liquidity in equity markets was cause for concern—notwithstanding the threat of spending cuts from March 1—there are not many better investment opportunities.

Noting that January saw unusual amount of money coming into equity markets, Luna said that this (massive inflows of money) will keep markets vulnerable—even if you do not factor in the risk of budget cuts. However, he also emphasized lack of other options.

“But we have to place people’s money where it can get a return. Sitting on cash is not going to do it. Government bonds — you’re already seeing people lose money there this year. The money has to flow back into equities,” said Luna to CNBC. But in the event of sequester coming into effect, Luna believes that stocks could pull back as much as 5%.

Michael Farr, president of investment management firm Farr, Miller and Washington, believes that $1 trillion budget cuts in next 10 years will weigh on the equity markets with stocks pulling back as much as 10%. However, this will not deter investors and money will keep rolling in equity markets, said Farr.

“I think you’ll see investors come in and buy the dips, and perhaps longer-term they should. Look at P-E ratios and other metrics. Stocks are not wildly overvalued,” added Farr to CNBC.

So far 60% of the S&P 500 companies have announced quarterly results in the ongoing earnings season with 70% exceeding Wall Street’s estimate on earnings front while 66% beating analysts’ forecast on revenue front, showed a data compiled by Thomson Reuters in the preceding week.

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edliston
Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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