March 10 - After a five year march upward, the debate is on whether the bull market can drive higher despite an economy that continues to drag its feet. Bobbi Rebell reports.
The bull market just celebrated a big birthday. Five years strong on Sunday. The S&P 500 opening the week at record highs. It's been a dramatic march upward, happening at the same time the U.S. economy has basically just limped along. The latest stat- while the February jobs report came in better than expected, it still showed a labor force that is not growing at the rate it should be at this stage of an economic recovery. And it's just that lackluster performance that will keep the Fed supporting the recovery, and the stock market moving higher, says the very bullish John Manley of Wells Fargo Advantage Funds. SOUNDBITE: JOHN MANLEY, CHIEF INVESTMENT STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "They are only taking away what isn't needed anymore. Just listen to what they say when the Fed says, when Chair Yellen says, 'we don't want to restrain the economy.' She is probably broadcasting they are not going to raise rates for another year or two." But it is that Fed support over the past five years that is exactly the reason stocks are now overvalued says Seabreeze Partners' Doug Kass. SOUNDBITE: DOUG KASS, FOUNDER, SEABREEZE PARTNERS MANAGEMENT (ENGLISH) SAYING: "What really buoyed the stock market especially in the last 24 months, and now I think we're in an aging bull market, was the obvious liquidity afforded by central bankers, not only in the Federal Reserve, but central bankers around the world. It's interesting to note, as we began 2013, there was not one strategist who expected the sort of rise in price earnings ratios and valuations that we experienced last year. After all, we only had about a 5 percent earnings growth but we have a 30 percent rise in the S&P 500 index, which means that valuations rose by 25 percent." That's just too much says Kass. He says stocks are about 10 percent overvalued. Manley argues there is still opportunity- lots of it. SOUNDBITE: JOHN MANLEY, CHIEF INVESTMENT STRATEGIST, WELLS FARGO ADVANTAGE FUNDS (ENGLISH) SAYING: "I honestly do believe that we haven't reached the kind of excesses that lead to market peaks. The market needs encouragement from the Fed. The economy needs encouragement from the Fed. The Fed isn't targeting the market but the economy needs help and as the Fed pushes money towards the economy it tends to flow through the capital markets and make them go higher." That said, Manley expects more modest returns this year than last- in the mid single digits.