market folly

We're back with the weekly investment strategy from Raymond James' chief investment strategist Jeff Saut. (If you missed his previous commentary you can check out last week's here). This week Raymond James turns their focus to their 2010 outlook. Saut identifies the first half of this 2009 rally has been spurred by liquidity while the second half of the rally has arguably ben driven by improving fundamentals. Saut believes 2010 could be a different story though as stock selection and market timing will need to be used in order to outperform.

The 68% rally from the lows in March is quite a spectacle and Saut duly notes that such a monster rally eliminates some margin of safety. Not to mention, he feels we'll see some headwinds in 2010 largely due to rising taxes, decreased stimulus efforts, and difficult earnings comparisons for companies. Saut also believes that inflation fears will start to pick up, thus leading to interest rate fears. Interestingly enough, Saut also feels the US dollar will continue to strengthen. The constant downtrend in the currency that has all of a sudden been followed by a strong rally has given many people pause for reconsideration. Is it merely a counter trend rally or is this a true reversal?

Saut and his Raymond James team have laid out some themes to play in 2010, writing: "Further, in 2010 we think investors should be positioned for: Sovereign balance-sheet risk (potential defaults: Venezuela, Ukraine, Argentina, Pakistan, Latvia, etc.), increased geopolitical threats; Asian urbanization, a potential commercial real estate crisis; rising taxation/inflation/regulation; the emerging and frontier market consumer; rising global growth, free cash flow beneficiaries; energy and alternative energy; infrastructure plays (electricity, water, etc.); technology (read: volume monetizers); US exports and business spending; dividends; and a return to active portfolio management."

Embedded below is Jeff Saut's entire weekly investment strategy for your perusal:




Also, you can download the .pdf here. Interesting thoughts from Saut and his Raymond James team as they examine themes for 2010. For more on positioning for the new year, check out the top ten investment themes for 2010. We detail Saut's investment strategy each week and you can check out his market commentary from last week, as well as his thesis that the market will end the year higher.