(1888PressRelease)
April 08, 2009 - Rathbone Brothers Plc, MFS Investment Management and TD Ameritrade Holding Corp. say the reliance on banks is making them increasingly concerned that the 25 percent gain by the Standard & Poor’s 500 Index since March 9, the steepest rally since 1938, will dissipate. While rising home sales and durable- goods orders show the economy may be bottoming, unemployment and consumer debt as well as prospects that banks will be forced to write down more loans may halt the gain in equities.
“People should not get carried away,” said Waters, “We first need to see genuine signs of economic recovery.”
The S&P 500 fell 1 percent to 833.99 as of 9:36 a.m. in New York after Mike Mayo, the New York-based analyst who left Deutsche Bank AG to join Calyon Securities, recommended selling banks because of his forecast that loan losses will exceed levels from the Great Depression.
In 11 recessions since 1938, stocks have rebounded an average of five months before a recovery in earnings, according to data compiled by Waters. The economy has contracted for 16 months, equaling the two longest slumps -- between 1973-1975 and 1981-1982 -- since the Great Depression.
The earnings decline that has lasted for six straight quarters will get worse before it gets better, with profits at S&P 500 companies decreasing for three more periods, Bloomberg data show. Companies from Microsoft Corp. to DuPont Co. already said profits will be disappointing. Analysts predict banks, brokerages and insurers will earn about $21 billion in the last three months of 2009, compared with a loss of $65 billion a year earlier, according to estimates compiled by Bloomberg.
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