market folly

It's been a while since we covered the market commentary of Jeff Saut, Chief Investment Strategist from Raymond James. Back in April, Saut advocated caution and he turned out to be right as the markets saw a precipitous decline. During the correction in mid-to-late May, Saut said the market was in a bottoming process. Obviously, May was quite a volatile month and he felt it was a constructive pullback. In his latest commentary, Saut focuses on the debate as to whether the rally since the March 2009 bottom is just a rally in the midst of a bear market or the beginning of a new secular bull market.

Generally speaking, Saut's portfolio construction has been tilted 80% toward wherever he feels a secular bull market has developed and 20% to a dynamic approach that swings with the market. So while the majority of his portfolio seems to be more static, the dynamic portion of his portfolio comes into play as he started adding hedges in April to protect his portfolio. Into the May turmoil, we learn that Saut shed those hedges. It's often said that the hardest thing to do is to remove your hedges when they are protecting you the most. Yet, that appears to be exactly what Saut has done so kudos to him for the conviction. Also, take note that the secular bull market portion of his portfolio lies essentially in "stuff stocks." Since the fourth quarter of 2001, Saut has been bullish on energy, agriculture, and metals stocks with a yield.

All said and done, Saut still leaves a few questions unanswered. It's not clear if we're in a new bull market or merely a bear market rally. In the near-term though, he feels that his call to remove hedges into the May tumult was the correct move and he obviously feels that the recent action is constructive. He'll obviously stay nimble with a portion of his portfolio but that is the latest update direct from the market strategist.

Embedded below is the most recent market commentary from Jeff Saut, Chief Investment Strategist at Raymond James:



You can download a .pdf copy here.

Saut has been right-on as of late as he called for caution in April and then recently said the market was in a bottoming process. We now see he's shed his hedges and appears to think the market is in decent shape here. While the markets and economy don't always move stride for stride, we do make note of global macro hedge fund Prologue Capital's cause for concern which we detailed this morning. Though the various economies of the world still have structural problems to work through, the market could have very well discounted this fact as they are forward looking mechanisms. This of course ties directly into the archaic market debate of perception versus reality. As always, we'll have to wait and see.