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Smithers Sees ‘Significant’ S&P 500 Rally Before Stocks Drop

U.S. stocks are set for a “significant rally” which will provide an opportunity for investors to sell before equities resume declines, according to economist Andrew Smithers.

Companies are cashed up and likely to buy back shares at a time when price-to-earnings ratios are low, providing a trigger for a short-term rally, said Smithers, who claimed stocks were overvalued in 2000 before a near 50 percent decline over 2 1/2 years. Investors should sell shares once their holdings gain 10 percent because even after the recent rout, U.S. stocks are about 40 percent above fair value, the president of research company Smithers & Co. said in an e-mail on Aug. 18.