market folly

Raymond James' Chief Investment Strategist Jeff Saut is back with his weekly market commentary. In this week's investment strategy entitled "Neverland?!," Saut focuses on the increasing divergence between perception and reality, a topic we've touched on in the past as well.

Saut outlines two options for US equity markets and he notes that "the valuation disparities between the two have rarely been so great." His first option claims that investors are too defensively positioned given the strength of global growth. His second option claims that markets have been running on fumes from year-end window dressing and new year repositioning. Obviously, the two options are wildly divergent and give one pause for thought as to which is reality.

Saut ends by noting that Raymond James had been 'cheerleading' the market along with everyone else since the March 2009 lows. However, they have since become cautious (but not bearish) as we enter the new year. He writes, "While we think the 4Q09 earnings reductions are simply an anomaly caused by corporations attempting to get earnings back in line with what auditors will agree with for yearend purposes, it could give the equity markets a 'pause for cause' when combined with the other worries we cite. Hence, we remain cautious."

His latest note comes after we covered Saut's 2010 outlook and his commentary from last week where he said to watch the US dollar.

Embedded below is the document of Jeff Saut's investment strategy from this week:




You can download the .pdf here.

For more research out of Saut's firm, check out Raymond James' analyst best stock picks for 2010. In terms of other recommended investment strategy, Bank of America was recently out saying to overweight equities & underweight bonds.

The debate over perception versus reality continues...