It almost seems out of place – like a spritz of a lilly inching up through the crusted snow after a long winter – to report some good economic news these days.
But there it is, in the form of an investment forecast by the investment bank UBS that says the U.S. stock market will rise, and significantly, in 2009.
“The consensus outlook for 2009 is a full year of gloom,” writes UBS analyst David Bianco in a research report released this week. “We believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect.”
To say that, if Bianco’s forecast comes to pass, the stock market could rise by as much as 53% - yikes – to 1,300 by the end of 2009, would be wonderful news. But let’s have some balance, and know that Bianco also predicted a 16% upward spike in the S&P 500 for 2008, but it fell (freefell may be a better term) 42% for the year.
Bianco’s is basing a large part of his forecast on what has happened in the past few weeks. He notes that the S&P 500 climbed 13 percent from an 11-year low on Nov. 20 as the government agreed to protect New York-based Citigroup Inc. from further losses and the Federal Reserve stepped up efforts to unfreeze credit markets. Now he notes that 2008’s market collapse gives investors a chance to buy the biggest “growth” stocks in the S&P 500 at “deep discounts to intrinsic value,” adds Bianco, who recommends energy, technology and industrial shares.
UBS thinks that while the corporate sector won’t see much in the way of profits in ’09, the stock market has accepted this and is ready to move on. “The macroeconomic and corporate profit outlook for 2009 is horrible,” the report says “But share prices have moved well ahead of this and are now pricing in a multi-year recession/depression.”
Tell that to my favorite cell phone manufacturer, Research in Motion (I own a Blackberry) that is lowering its forecast for the last quarter (ending November 29).
RIMM now expects its adjusted earnings per share to be in a range between 81 cents and 83 cents for the quarter. That's down from its initial forecast of between 89 cents and 97 cents per share. Analysts had been expecting, on average, 91 cents per share, according to a survey by Thomson Reuters.
Again, the tough economic climate is to blame, as RIMM apparently feels it’s not selling enough of my favorite cell phones. Says RIMM, the lowered forecast was "primarily due to the lower-than-estimated revenue and the unfavorable impact of the strengthening U.S. dollar during the quarter," RIMM said. RIMM also anticipates that third-quarter revenue to be in a range between $2.75 billion and $2.78 billion, down from a previous range of $2.95 billion to $3.10 billion.
Broken down to brass tacks, RIMM expects to sell 300,000 Blackberries than it had calculated for the quarter, 2.6 million instead of 2.9 million. That could change next quarter as the returns from the new line of Blackberry Storm and Bold come in. RIMM expects good numbers. "Initial sales of new products have been very positive ... however product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter," said Jim Balsillie, the company's co-chief executive.
In June, RIMM’s stock was trading at $148.13 – now it’s at $37.32. Certainly, RIMM seems like a good value at that price.
Besides, haven't you heard? Stocks are going up next year.