Birinyi Is Building Cash as Stocks Get Harder to Analyze

(Bloomberg) -- Laszlo Birinyi, a steadfast bull who has mostly been right in navigating a decade-long rally in equities, says he is having a tougher time making sense of the market right now.

Stocks continued their harrowing May Wednesday, sliding to a 12-week low as a key part of the Treasury yield curve fell further into inversion. The reasons for the tumult -- rising trade tensions and geopolitical issues-- are clouding Birinyi’s outlook, the one-time Salomon Brothers strategist who founded Birinyi Associates in 1989, said.

“The reactions and the inputs are so volatile,” he said in a phone interview. “If it was just the trade tension, you could somewhat analyze it, but given the fact that it all has a political overtone, that’s beyond my capabilities.” The firm has a higher cash position than it might otherwise.

There are plenty of things to worry about. Markets around the world are getting pummeled this week as the trade war between the U.S. and China drags on, adding to increasing worries over global growth. Haven buying drove the yield on 10-year Treasury notes under 2.21% on Wednesday, the lowest level in nearly two years. And a key slice of the yield curve inverted further, a historical indicator that a recession could be around the corner.

It’s obscured things enough that Birinyi isn’t looking to make moves he can’t be certain about. There’s no road-map or script, he said, as we’re in “uncharted territory” given the length of the bull market. “There’s not a whole of precedents to which you can look to to hang your hat.”

Birinyi’s reputation has solidified over the last decade after his bullish stock market forecasts defied pessimists and came true over and over. In September 2011, for instance, he said U.S. companies would be immune from the debt crisis brewing in Greece, a forecast that proved prescient just a month later.

Now, he’s looking for opportunities in a market driven by an incessant barrage of headlines. Birinyi’s focusing on individual stocks. He likes Deere & Co., which fell after cutting its annual forecast as many customers shunned major purchases amid trade uncertainty, and Ralph Lauren Corp., which reported solid earnings but also got caught up in the trade tiff.

He’s shunning sectors that are in the cross-hairs of the escalations, including retailers and stocks with direct connections to China.

To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi

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