From this week's Commentary
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The Select Investor Weekly Commentary August 18, 2000
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The Good News
Except for the weekly sector rotations, the markets
seem to be settling into a stable pattern that may
last into 2001. We expect the technology, energy
and financial sectors to dominate through the fall
and into next year.
There are strong fundamental arguments for all
three sectors :
Technology
Except for brief periods of correction,
such as last April, the technology
sectors will dominate the markets for at
least the next decade.
The March - April correction in the
technologies has run its course and the
sectors are ready to begin moving higher
again. We will probably see choppy growth
in the next few months and explosive
growth at the end of the year.
Financials
Interest rates are expected to be stable
at least until December and there is a
very real possibility that rates will
begin to come down in 2001. This is very
bullish for the financial sectors that
have been out of favor for more than a
year now.
Energy
It is becoming clear that high energy
prices and low levels of supply are
structural and will thus last longer than
previously believed.
US inventories are at their lowest levels
in decades, global demand is rising with
recovering global economies, and OPEC is
in no hurry to increase output. Natural
gas inventories are expected to be tight
for the next two to three years. This
should lead to strong growth in the
Energy Service and Natural Gas funds for
some time to come.
These stable, long-term trends may provide the road
map for the next 12 to 18 months.
The Bad News
The broad outline of economic fundamentals that
will dominate the markets over the next 18 months
is easy to read. Unfortunately, stock prices are
driven by short-term, emotional considerations.
There is still a possibility for sharp corrections
in any of these sectors.
The Dog Days of August are coming to an end and the
late summer torpor is beginning to lift. This is
leading to a broad rally and generally improving
prices, but there was no "convincing correction"
after the July 17th peak. Because of this, markets
may be choppy and the "convincing correction" may
come at any time in September or October, probably
triggered by some unpredictable, insignificant news
event. |
