Investment Strategy Update – 2/28/13

Posted March 1, 2013 by rvillareal

• U.S. equity bull market entrenched despite (a) being longer-in-the-tooth at nearly four years than most Equity Bull Markets and (b) the already-strong runup to start the year.[private]
• Greater confidence in the DE “Baseline Prospect” (probability 65%, up from 60% and 55% last December) and a more favorable distribution of risks around that Scenario.
• Macro-driven investment themes including a “Tight Fiscal-Easy Money” policy mix; Sea Change in the Japan economic prospect going forward, a declining yen, the Japan policy prospect and new Prime Minister; a continuing entrenched U.S. housing recovery and expansion (an older theme); and Tax Reform.
• Raised DE 2013 and 2014 S&P500 Operating Earnings estimates and 2013 fair value estimates and targets—with fair value in the 1525-to-1550 range for the S&P500 Index and a 1600 target later this year, up from 1500-to-1525 and 1550, respectively.
• This mainly is a consequence of 1) a higher likelihood for the DE Baseline Prospect of better growth, especially later this year thus better earnings growth, 2) a much better global economy, especially in Asia and 3) the continuing stunning performance of the S&P500 companies on earnings and profit margins. 

DE Investment Strategy Update -Equity 2-25-13[/private]