Can the bull market last? Minnesota investment pros weigh in

The bull market has been on tear in the past six months, with major indexes hitting all-time highs last week. We asked our experts what the future holds.

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Last month, Brian Belski, the Minnesota-bred chief investment strategist at BMO Financial Group in New York, rocked the investment world when he predicted the Dow Jones industrial average, now about 17,000, could hit 44,000 within 10 years, a compound annual growth rate of about 10 percent.

Shades of the infamous investment book, “Dow 36,000,” which came out in 2000, just as the market tanked and then went nowhere for 10 years in what’s been dubbed “The Lost Decade.”

“It’s not beyond the historical scope of the market,” Belski said in an interview last week. “Bulls are bred from lost decades. We had that. There remains a tremendous amount of fear and apathy with respect to equity investment. It’s been elongated by the strong bond market. Mom and Pop in Willmar need to lose money in bonds before they run to stocks, our investment class of choice for the next 10 to 15 years. And I believe we are in the last great bull market of my life.”

Belski, 48, has been one of the more prescient market analysts since the Great Recession, arguing that American industries — lean, productive and laden with cash — were the best long-term bet in the world. And last week the Dow Jones industrial average topped 17,000 for the first time and the Standard & Poor’s 500 also hit an all-time high of 1,985.44.

Last week we sought a six-month market checkup from our Star Tribune Investors’ Roundtable experts, including Belski, to seek how they think the rest of the year will play out.

Q: What is your impression of the first half of 2014?

Brian Belski: Not surprising to us. We anticipated the strength last December.

Erica Bergsland of Advantus Capital Management: I am concerned about complacency across markets, particularly in light of weak growth and geopolitical threats in Iraq and Ukraine. Stocks shrugged off very disappointing economic data. Harsh weather played a role … and we expect better growth in the remainder of the year. Full-year growth is not likely to be as robust as I expected at the end of last year.

Jim Paulsen of Wells Capital Management: I have thought since last year-end that the stock market would initially be pushed higher toward the 2,000-ish level during the first part of this year by “better than expected economic news.’’ I think for the most part economic growth has proved stronger and broader than most anticipated and this has kept pushing the stock market higher.

Carol Schleif of Abbot Downing: While the broad market hasn’t seen a correction, individual sectors and indexes have seen both 10 percent corrections and rebounds. The biggest concern across the board is that valuations everywhere have moved up and leave little margin for disappointment.

Russ Swansen of Thrivent Financial: U.S. large caps have advanced about in line with earnings growth expectations for the year. There was a modest correction midway through the first half in the relative gains of mid- and small-cap stocks, which was overdue. Also in biotech and social networking stocks. Those were both good developments and perhaps will provide some support for the market.

Biff Robillard of Bannerstone Capital Management: The most remarkable thing is that the Fed pulling back on quantitative easing hasn’t hurt stocks or bonds.

John De Clue of the the Private Client Reserve, U.S. Bancorp: The economy has proved more sluggish than I would have thought, which has led to a more dovish Fed, which has led the Fed to support the stock market.

Q: What’s your recommendation for the remainder of the year: buy, sell or hold?

Erica Bergsland: Valuations in both the domestic stock and bond markets are at levels that imply very muted returns from here.

Jim Paulsen: I think the stock market is nearing its high for this year and would not be surprised if the S&P 500 peaked between 2,000 and 2,050 in the next few months.

David Joy of Ameriprise Financial: I expect the bull market to persist beyond any correction as the economy continues to grow, so a long-term investor should only need to remember to stay balanced.

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  • Paulsen

  • Robillard

  • Swansen

  • Bergsland

  • Schleif

  • Belski

  • De Clue

  • Lilly

  • Joy

  • Ramsey

  • Selected winning and losing stocks from the first half of 2014 (through July 2)

    Name Last price Total return YTD

    Gainers

    Intricon Corp. $8.79 128.1%

    ANI Pharmaceuticals Inc. $37.05 84.5

    Ikonics Corp. $26.43 79.2

    Famous Dave’s of America $29.02 58.6

    Appliance Recycling Centers $4.04 40.8

    of America

    Losers

    Great Northern Iron Ore Ppty $18.33 –65.9

    MGC Diagnostics Corp. $8.38 –33.8

    Image Sensing Systems Inc. $3.35 –32.3

    Arctic Cat Inc. $39.49 –30.3

    Norcraft Cos Inc. $14.19 –27.7

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