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Long-Running Bull Market With 'Compelling' Fundamentals Unlikely To Slip, Says Argus Analyst

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Long-Running Bull Market With 'Compelling' Fundamentals Unlikely To Slip, Says Argus Analyst
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Market participants were beginning to feel uncomfortable with the extended rally that was ongoing since the end of the bear market in March 2009. When the major market gauges reversed course in late January, it didn't come as a surprise.

Despite the recent sell-off, which intensified Feb. 5, Argus analyst Jim Kelleher said he sees no signs that that the long-running bull market is at risk of falling into a bear market, as economic and earnings fundamentals remain compelling.

The market is experiencing its first meaningful sell-off since the twin corrections around Brexit and the U.S. prior to the presidential election. Ahead of this, the S&P 500 Index sold off by 11.2 percent from December 2015 to February 2016 amid a trough in energy prices.

A rise in bond yields, which could be interpreted as a "preemptive strike" against inflation; slackening consumer spending; and lukewarm performance in the housing and automotive sectors could be causes of the sell-off, Kelleher said. 

The main driver, though, could be profit-taking after a strong 2017 and a solid start to 2018, the analyst said. Corrections, though in bad taste, are a necessary evil that keep the market mechanism functioning smoothly, Kelleher said. 

Notwithstanding the setback witnessed by the stock market, Argus continues to see good value in U.S. stocks.

"We also favor risk-on and economically sensitive stocks with good growth prospects over defensive and income-oriented names that actually offer limited defense in an environment of rising interest rates," the analyst said. 

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