Barry Bannister's Blog

Managing Director
Stifel Nicolaus

Barry Bannister joined the Stifel Nicolaus Research Team in connection with Stifel's acquisition of Legg Mason's Capital Markets Group in December of 2005. Mr. Bannister provides investment research to financial institutions globally in the areas of engineering, machinery, and associated strategy related to commodity markets served by companies in those industries. Prior to joining Legg Mason in 1998, he was a senior analyst providing North American machinery industry coverage and later co-head of U.S. equity research in the New York office of the UK investment bank S.G. Warburg & Company (now part of UBS) from 1992 to 1998. Prior to that, he served as a senior equity analyst for the buy-side firm FTIM/Highland Capital Management from 1990 to 1992, and before that as an equity analyst for the mutual funds and trusts of AmSouth Investment Management (now Regions Financial) from 1987 to 1990. He is a five-time winner of the Wall Street Journal All-Star Analyst award, three-time winner of the Forbes Magazine/Financial Times/StarMine top analyst award, Top-10 U.S. Stock Pick analyst for CNBC/Zacks, and three-time Institutional Investor magazine All Star Analyst (2007, 2008 and 2009). Mr. Bannister holds a B.A. from Emory College and an M.B.A. from Emory University School of Business Administration. He has held a CFA designation since 1991.

Bulls Take a Step Back in the Second Quarter

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Secular bear markets feature cyclical bull & bear stages. We expect this one to cross over to “Late Bull” if we stay above the 200 day moving average (dma) for the S&P 500. But after that, we see the S&P meeting resistance at 1,600 e.g., the secular flat market continues.

As China Teeters and Europe Dithers, a Good Time to Recap our Macro Views

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We see the S&P 500 ending 2012 at 1,400 with a mid-2012 dip to 1,200 followed by 1,600 around 2013-14 on a P/E 16x normalized, albeit sharply slowing EPS. By mid-2012, we anticipate QE3 in response to deflationary shocks. Beyond mid-2012, we expect large cap growth equities to lead the S&P 500 higher with financials fueling (and capping) the S&P rally at 1,600.

1Q11 Macro-Trends: Early Reflation Feels Like Growth

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In 2011-13 we see the S&P 500 near the high end of the ~700-1500 range of the past decade, then backto the middle of that range by mid-decade on tails risks (a 2nd oil shock, geo/political risk & Fed exit). We like U.S. growth stocks (Tech-Media-Telecom-Health), because what is coming in 2011-12 may feel like a faint echo of the late 1990s Tech Bubble.

4Q10 Macro-Trends

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A wall of worry is to be expected. S&P 500 Mid-2011 $1,250 target is unchanged from 3Q view. After ~$1,250 S&P 500 by mid-11, we see ~$1,350 by 2012. 2011 EPS views emerging from 3Q earnings reports are drawing attention to how inexpensive “risk” relative to “risk aversion” has become. We think the U.S.$ is bottoming, CRB is peaking, and EM is peaking as well. Buy mid/large cap U.S. growth stocks.

A Rocky Balboa Stock Market

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We believe the S&P 500 around $1,100 is positioned almost exactly in the middle of a “secular bear market” trading range, which we expect to exist for the period 2000-14. At this point, investors may be entering the Rocky Balboa home stretch of "punch drunk" volatility. In a short cycle sense, U.S. stocks may now be a “mid-bull,” e.g. volatile, with a less steep rise to 2010/11 in which the S&P 500 may peak at $1,250 in 2010, $1,350 in 2011.

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