Even as major U.S. stock market indexes have risen more than 50 percent since their March 9 lows, few people are willing to go out on a limb and shout that they’re headed higher.
Few, that is, except Robert Froehlich, who recently joined Hartford Financial Services Group Inc. as a senior managing director. What’s he shouting? That the Dow Jones industrial average will close above 11,000 by the end of the year and rise 20 percent in 2010.
Froehlich, likely the most bullish man on Wall Street, has spent the last two days in Philadelphia talking to investment advisers, including those at Raymond James and Smith Barney. He freely admits to being “out in left field with my views.”
To Froehlich, the Dow’s climb from 6,547.05 on March 9 to close above 10,000 on Oct. 14 for the first time in more than a year represents a “taking back of an over-reaction” last fall.
He has five reasons why he thinks stocks will move higher even as others worry they’ve come too far too fast.
First, many companies are reporting revenue growth again, not just earnings growth fueled by cost-cutting.
Next, Froehlich sees global GDP in 2010 rising much faster than the current top-end projections of 5 percent.
Third, he believes “the U.S. consumer is not as bad off” as everyone else says.
Fourth, business spending will pick up in 2010 as corporations post higher earnings. And finally, most of the federal stimulus program will be spent over the next year.
There are two things that would cause the strategist who calls himself “Dr. Bob” to retreat from his bold call.
If the Federal Reserve were to begin raising interest rates before the mid-term elections next November, “that would hurt,” Froehlich said. The other X-factor is if crude oil were to spike into the triple digits again.
The Fed has kept the federal funds rate near zero for more than 10 months, but oil has risen 136 percent since dipping below $34 a barrel last December. Oil settled Thursday at $79.87.
Let’s give Froehlich some credit. In February, he wrote that the Dow would hit 10,000 by the end of ’09. His was a lonely call at the time, but I would expect nothing less from someone whose collection of essays, called A Bull for All Seasons, was published during the panic of September 2008.