The call for this week: It’s conference week and my attention will be focused on Raymond James’ 37th Annual Institutional Investors Conference in Orlando where over 300 companies will be presenting to more than 1000 portfolio managers and analysts. The world’s investor focus, however, will likely be on this week’s ECB (European Central Bank) meeting. Many pundits expect another disappointing announcement; I am not one of them, given Europe’s worsening financial conditions since December (see chart 2). I think there will be a 10 basis point reduction in the interest deposit rate accompanied by an acceleration of the asset purchase program, as well as some other credit-easing measures. If so, it could push credit spreads down, causing the bank stocks to extend their rally (see chart 4). Indeed, one of the drivers for the overall stock market, and the financial sector, recently has been the narrowing of credit spreads (see chart 5). This morning, however, the overbought condition is coming into play, as North Korea calls up troops and threatens nuclear attacks, leaving the preopening S&P futures down about 7 points at 5:30 a.m.

Jeffrey D. Saut is chief investment strategist at Raymond James.

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