Despite recent stock market volatility, the bull market rally will likely last another year or more, according to Eugene Peroni Jr., a portfolio manager with Advisors Asset Management Inc.
Mr. Peroni is a multicap manager who uses technical analysis to make his investment decisions. Advisors Asset Management has $4 billion under supervision.
From his perspective, the current stock market run is comparable to the five-year period through October 2007, when the Dow Jones Industrial Average peaked after a 96% gain.
He expects a similar gain from the March 2009 low point, which would bring the Dow up to around 13,000, or about 27% above where it is now.
“That target range could be reached,” he said. “Even though last year was defined as a market crash, it could also have been described as a sharp, short-lived correction.”
Mr. Peroni's big-picture analysis defines the current market rally as the third and final stage of a “three-cycle bull market” that began in 1982. The first cycle ran up until a correction in October 1987. The second cycle went from 1988 through 2000 and the implosion of the technology bubble. That down market period was exacerbated by the September 2001 terrorist attacks. The final cycle began in 2002, according to Mr. Peroni.
“We're bullish over the intermediate term of the next one or two years,” he said. “But the next seven to 10 years after that could be difficult.”
Mr. Peron's bottom-up stock-picking strategy involves analyzing companies based on three broad characteristics: price chart patterns, net investment flow characteristics and relative strength.
“We need the support of both the stock and the sector, which is why we tend not to invest in stocks that are one-offs,” he said. “We want the sector tail wind.”
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