Birinyi: Buy now before correction has correction

Birinyi: Buy now before correction has correction
Birinyi Associates says the recent fall in S&P 500 will bottom out by the end of March. The firm's advice? Pounce.
MAR 08, 2011
By  John Goff
The Standard & Poor's 500 Index will fall to 1,232 by March 31, marking the bottom of a “modest correction,” according to Birinyi Associates Inc., which cited data measuring average drops of at least 5 percent since 1945. The decrease would represent a 2 percent retreat from yesterday's close of 1,256.88. When the S&P 500 loses 5 percent during a rallying period, the decline lasts an average of 41 days and extends to 8.3 percent, according to a report today by Cleve Rueckert, an analyst at Birinyi Associates. Since the S&P 500 peaked this year at 1,343.01 on Feb. 18, it has fallen 6.4 percent through yesterday, paring gains since March 9, 2009, to 86 percent. “History suggests that the current decline will be short- lived, and most likely presents a buying opportunity,” the Westport, Connecticut-based research and money-management firm said in a report today. Thomas Lee, equity strategist at JPMorgan Chase & Co., and Mary Ann Bartels of Bank of America Corp. also said this week that U.S. equities are poised to climb. Birinyi was one of the first to tell clients to buy as the S&P 500 fell to its 12-year low in March 2009 and has held a bullish outlook since then, saying stocks are in the midst of a “multi-year” rally and may climb as high as 2,854 by 2013, based on past bull cycles. The S&P 500 climbed 1.3 percent to 1,272.56 at 10:07 a.m. in New York, the first advance of the week. The Dow Jones Industrial Average climbed 1.1 percent to 11,737.27. While the average 5 percent decline leads to an 8.3 percent drop for the benchmark equity index, Birinyi said a correction forms 33 percent of the time and becoming a bear market is “even less likely,” according to the report. Slides that lead to bear markets have occurred in 10 percent of the cases. A correction is often defined as a 10 percent drop. Laszlo Birinyi, the firm's founder, said in December that the S&P 500 may climb to 1,333 in 2011. The firm said in its February report that may be conservative, as “2011 has gotten off to a positive start.” The index is forecast to rally 11 percent to 1,400 from yesterday's close, according to the average projection of 13 strategists surveyed by Bloomberg. --Bloomberg News--

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.