Market Shifts to the Turkey Trot

11/25/2010 03:32 pm ET | Updated May 25, 2011

The Christmas holiday season is often a harbinger of happy events, but only partly this past week, which for investors turned out to be a week of gobblydegook.

On Tuesday, for example, there were of a couple of external shockers--artillery fire between the Koreas and signs of a spreading European debt crisis (notably involving Ireland, Spain and Portugal). In response, it turned out to be a terrible Tuesday for investors as the Dow tumbled 142 points.

As a result, the following day's market showing--the day before Thanksgiving--should have been a turkey, or a wicked Wednesday, in continuing response to those shockers, as well as to recent revelations of October declines in new and existing home sales.

But wicked Wednesday never came. Call it the case of the missing turkey. Instead, we had a turkey trot, as the Dow went on a tear that day, more than offsetting the previous day's loss with a solid gain of nearly 151 points. Whether the turkey trot has any staying power is still to be determined.

This pre-Thanksgiving jump largely reflected a tasty news entree of growing personal income, strengthening positive consumer sentiment, the fourth consecutive month of consumer spending gains and lower than expected weekly jobless claims.

So where does that leave the nation's more than 80 million stock players?

In good stead, according to some market pros, who see flickering green lights that we're entering a period of renewed economic zip. In addition, some suggest, instead of the usual merry month of May, change that, at least for investors, to the merry month of December.

One of them is Fred Dickson, the chief investment strategist of regional Northwestern brokerage biggie D.A. Davidson & Co. of Great Falls, Mont.

"I would absolutely be a buyer of stocks now," says Dickson, a former strategist at Goldman Sachs, who thinks it's the wrong time for investors to be chicken and views the European debt problems and the current trouble between the Koreas as "passing thunderstorms that will move on."

He figures a year from now European debt problems will be about where they are today. "I'd guess Europe has four of five years of debt workouts to go," he says.

He also thinks China has too much to lose not to try to aggressively influence North Korea from doing something incredibly stupid, and, as such, he expects the Chinese to take action in this respect.

A revival of positive economic momentum (also reflected in the recent upgrade of third-quarter GDP growth from 2% to 2.5%) and low interest rates are the chief reasons for Dickson's market enthusiasm.

"The economy," he observes, "is like a car going 25 miles an hour in a 40-mile speed zone, but sooner or later it will shift into a faster gear." It's not a robust recovery, he says, but a slowing improving one.

Given this outlook, he expects an essentially rising market for the balance of the year, with the Dow (now at 1187) wrapping up 2010 at around 11,500 and then following up with about another 10% or so advance in 2011.

His favorite stocks are companies which have increased dividends for at least the past 10 years and sport above-average dividend yields. In this context, he favors PepsiCo., Procter & Gamble, AT&T, United Technologies, Emerson Electric, Kimberly-Clark and Automatic Data Processing.

What about gold, the planet's hottest investment? It has had a huge run, and appears to be expensive, Dickson says. He sees a continuing modest pullback near term, but he figures it's likely to be higher a year from now.

San Francisco money manager Gary Wollin, who manages a bit above $100 million of assets under the banner, Gary Wollin & Co., echoes some of Dickson's bullish thoughts, especially on the economic front.

As for those external shockers, Wollin thinks "we could see some war games and a lot of unrest in Europe, both of which could drive away potential buyers." But he expects them to have a short shelf life in impacting the market, and predicts an 11,500-12,000 Dow by year-end.

Still, he believes there's always a chance "things could spiral out of control in Europe" via more riots in the streets.

Another plus for the stock market--traditional muscle-flexing in December--is noted by Sam Stovall, the chief investment strategist at Standard & Poor's.

Since 1945, he points out, the S&P 500 registered its strongest monthly advance in December, rising 1,7%, versus 0.6% for all 12 months. What's more, the market rose in 77% of all Decembers, versus 59% for the average of all 12 months.

In other words, look for a merry Christmas for investors.

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