(MENAFN- Gulf Times) Laszlo Birinyi says there's more money to be made in the stock market.
"You're in a bull market, and in a bull market stocks go up," said Birinyi, the investor whose calls have repeatedly come true since 2009. "The best thing I can do right now, which I have been saying all along, is stay the course."
At the depths of a summer swoon, the president of Birinyi Associates in Westport, Connecticut, predicted that stocks would "come out OK" after a six-day rout sent the Standard & Poor's 500 Index tumbling into a correction. Since then, the gauge has rallied 11%, with the bulk of the gains coming during an 8.3% rally in October.
At the rout's worst, Birinyi said he was optimistic stocks would rebound because the causes of the correction weren't hidden. China's surprise devaluation of the yuan sparked concern that slowing growth there would spread.
"When the market went down, I thought I knew why, and therefore I wasn't nearly as concerned as if it would've gone down for no reason," he said. "If I understand it, the market does too, and they'll react and respond accordingly."
The response came from central banks, which reasserted themselves in October. The Federal Reserve kept interest rates pinned near zero, while signs of weak growth prompted the European Central Bank to hint at potential extra measures. In Asia, China unexpectedly cut its lending rate and Bank of Japan maintained record stimulus. Another force in the rebound was buying by quantitative funds such as commodity trading advisers who operating in equity futures, according to a note Friday from strategists at JPMorgan Chase & Co Those traders, whose selling was blamed for worsening the rout in late August, showed signs of "capitulation" at mid-October and probably amplified the move in equities, strategists including Nikolaos Panigirtzoglou wrote.
"There is still an overhang of short positions in US equity futures, which if unwound could propel US equities even higher from here," they wrote. "While the position reversal by CTAs points to capitulation by bearish equity investors, the overhang of short positions in US equity futures suggests that there is room for further short covering."
The S&P 500 rallied 3.5% in the month's first three days, as concern over China faded with the nation's markets closed for a holiday. A weak US jobs report October 2 reinforced bets the Fed would stand pat on rates, sending the dollar lower and boosting commodities prices.
The October advance erased the S&P 500's loss for the year, leaving it higher by 1% as it capped fifth straight week of gains. That's the longest rally of the year. The Nasdaq 100 Index surged 11%, at one point coming within a point of its 15-year high set in July.
Energy and materials, laggards through August, paced gains in the broader index, with rallies of at least 11%. Crude rallied past $50 in the month, but failed to hold the gains amid a persistent supply glut.
European equities also saw the summer's worst performers lead gains, as the Stoxx Europe 600 Index jumped 8%, the most since 2009. Carmakers, miners and energy producers climbed, and European equities got a boost after President Mario Draghi said the ECB will consider adding to its bond-buying program this year.
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