Markets Not Quite at a Buying Opportunity: Knapp

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Feb. 12 (Bloomberg) -- Barry Knapp, head of equity strategy at Barclays Capital, discusses whether or not it is time to buy into the markets on Bloomberg Television’s “Market Makers.”

Dow down three percent for the year and say this is a buying opportunity?

Not quite.

I do not think there is a lot of risk.

What we thought would occur in the first part of the year and what we have seen so far this year is when you reach the inflection points where the fed is no longer easing, you do not have to consider it tightening but no longer easing, but typically you have gotten about an eight percent pullback in the market.

Ultimately it will resume the of trend.

We think we are a long ways away from a recession.

I would be much more comfortable biting the markets in 1700 and then by yang at 1815 or 1820. that would present a rail opportunity.

1738 a week ago monday would not have been bad either.

We think it will be a struggle through the first part of the year.

A lot of this has to do with the fact that we had a big improvement in earnings when earnings growth was zero.

Up to about nine percent right now.

That is what the market was discounting in the second half of last year.

A sustainable move higher, and they were really discounting the acceleration in earnings growth, a lot of which is attributable to earnings picking up and the market already discounted that in growth.

Do you think we will get to 1730? i do.

I think the history is pretty compelling.

The market is down eight or send subject to a fairly small deviation.

I just do not think we're through with this.

If you think about the policy construct, we will worry about purchases and how it will reverberate through the rest of the world.

Then we will worry about draining liquidity from the banking system.

Then we will worry about the rate hikes.

This is why the best times for equity markets have come when fed policy has been normalized, meaning positive policy rates and stable.

Typically the best time for investment and when you get high multiples on earnings is when you actually have normal, stabilize monetary policy.

What you are -- what was your take away from chairman yellen's testimony yesterday?

That she is not ready to change the threshold.

And that the belly of the treasury curve got hit again.

That is ultimately the issue, the five-year part of the curve, not the 10 year.

In essence, the back end of the treasury market was telling you growth had gotten better.

The five-year part of the curve is telling you when they did -- when they start discounting rates, it will only raise runs -- rates one percent per year.

They have never gone too slowly.

They'll easily too long and go twice that fast as least.

Financial conditions will tighten further and that will alternately be an issue for the equity market.

Not so much that it causes a correction that means we cannot be in the up trend we were in the second half of last year.

And the next hour we're sitting down with james bullard.

What do you want to hear from him to make you more bullish?

I do not think we can really hear anything.

Ultimately i disagree about the concerns about inflation.

I think what you see is domestically determined service inflection is running of the target.

Those pressures are easing.

I think people like james bullard are too pessimistic about the inflation outlook or worry too much about this inflation.

I think things are starting to go the other way, including wages responding to the lower unemployment rate.

If you are sitting in my seat, what would you ask him?

I would ask them to explain why we have the disinflation and why he thinks the trends will persist and why we should be worried about that.

Thank you for joining us and

This text has been automatically generated. It may not be 100% accurate.


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