Get ready for a choppy year in the stock market.
That’s the word from some of Seattle’s top stock pickers who gathered last week over steak at the 32nd annual Guess the Dow luncheon at the Metropolitan Grill.
Coming off a robust 2014 in which the Dow gained 7.5 percent to close at 17,823, the stock brokers expressed “cautious optimism” for 2015. Even so, every single one of the 10 panelists predicted that the Dow will rise, ranging from 18,540 to 20,000.
“The Fed is likely to start raising the short-term federal funds rate at midyear by 25 point intervals, which is not enough to impact equities this year,” said Diane Daggat of RW Baird & Co., who was one of the top stock pickers last year. “However, I do expect 2015 to be increasingly volatile and choppy.”
Here’s a look at their picks:
Jeffrey Atkin, Kunath, Karren, Rinne & Atkin
Dow close: 18,880
Top picks: Plum Creek, Red Lion, Seattle Genetics, General Motors
Quote: “The good news is that the U.S. economy is still in an upswing. I think the S&P 500 earnings will be up. And, perhaps more importantly, cash flow continues to grow so companies have flexibility to either increase dividends or buy back stock. And, I think, we will see more M&A activity in 2015.
Diane Daggatt, RW Baird & Co.
Dow close: 20,000
Top picks: Amazon, Seattle Genetics, Clearsign Combustion, Gilead Sciences
Quote: “I do expect 2015 to be increasingly volatile and choppy.”
Shaun Dennehy, RW Baird & Co.
Dow close: 19,440
Top picks: Greenbrier, Alaska Air, Seattle Genetics, Terraform Power
Quote: “I expect a volatile stock market, but continued growth in the U.S. economy…. I would not be surprised to see us go negative for the first half of the year, but that being said, I think corporate profits are going to prop the market up.”
Joel Ferrell, Morgan Stanley
Dow close: 19,656
Top picks: Omeros, Microsoft, Zulily, Weatheford
Quote: “The monetary wind has been at our back for over five years. The tailwind will begin to shift, but rather than becoming a headwind, will stall and likely cause markets to place bets where industries and companies can operate under their own power…. We’ve had a fantastic ride on this wave, but we don’t know how much longer it is going to last and where the beach is.”
Eric Brewe, RBC Wealth Management
Dow close: 20,000
Top picks: Amazon, Seattle Genetics, Precision Castparts, Wabash National
Quote: “Vast amounts of liquidity still exist and with my expectations for fixed income returns to be modest, we should see funds flowing to equities and a continuation of the bull market into 2015 and beyond.”
Mary Ann Heeren, RBC Wealth Management
Dow close: 18,952
Top picks: Columbia Bank, Zulily, Juno Therapeutics, Rite Aid
Quote: “Companies are in very, very good financial condition right now, having had interest rates as low as they have been for quite a number of years. They have big cash balances and they have been buying back stock.”
Matt Kelleher, UBS
Dow close: 20,000
Top picks: Boeing, Columbia Bank, Schnitzer Steel, Crescent Point Energy
Quote: “I’ve been sort of the perma-bear in this group, and for the first time in my 30-some odd years of doing this, I think we are starting to see more what Joel would call cautious and I would call negative things coming from the firms…. I think the flood of money last year into the Index funds spooked everybody. To me, there is no more bullish signal than that, because the New York firms are worried about something there.”
Brian Acarregui, Morgan Stanley
Dow close: 19,120
Top picks: Alaska Air, Homestreet, Washington Federal, Ally Financial
Quote: “I think we have had a really good run over the last five years, and I would expect the market to be a little more choppy this year.”
Matt Rudolf, Summit Capital
Dow close: 18,540
Top picks: Trupanion, Potlatch, Methanex, Numerex
Quote: “A real correction finally occurs, but the market finishes positive.”
Bill Smead, Smead Capital Management
Dow close: 18,861
Top picks: Nordstrom, Gannet, Bank of America, NVR Inc.
Quote: “I think we are entering a phase where Main Street outperforms Wall Street. And, so when Main Street outperforms Wall Street, a lot of things change. Capital will be demanded for the purpose of doing business on the ground.”