S&P--"The Outlook's Market Insight: "Buying Opportunities"
personalwealth.com
>>>Monday September 11, 2000 (08:11 am ET)
Market's Sinking Spells Are Buying Opportunities
By Arnie Kaufman, Editor, The Outlook
NEW YORK, Sep. 11 (Standard & Poor's) - Confidence continues to suffer from this year's sharp correction and many failed rallies. The tendency is to quickly nail down profits on any hints of trouble. The risk is that continued choppiness will exhaust investor patience. Broad-based adoption of a defensive strategy could have severe consequences. Spurred by the market's spectacular performance in recent years, individuals have sharply expanded their equities positions.
But an undercurrent of bullishness still exists. The ongoing global technology revolution led by U.S. corporations continues to bolster psychology. So does recollection of the easy stock gains of the past five years.
This year's market action, moreover, has had its positive side. Beneath the nominal net change in the major indexes lies a needed consolidation by over-extended big-cap stocks and a relatively strong showing by long-lagging second-tier issues.
Meanwhile, the downshifting in the economy should be enough to satisfy the Fed but unlikely to do a lot of damage to corporate profits. We're looking for a none-too-shabby 9% increase in operating earnings on the S&P 500 for 2001, after an estimated 13% gain for 2000. And lower interest rates should help support the P/E multiple side of the equation.
We expect the recent jump in oil prices, the result of re-stocking delays, to be reversed before long. We see a pullback to the high $20s per barrel.
The frantic merger and acquisition activity of recent years, providing a speculative fillip generally, shows no signs of slowing. Regulators are stepping in more frequently, but that's because of the increasing size and potential industry dominance of some of the proposed combinations.
Current moderation in the economy and in the stock market should extend the upward trends. We would maintain a positive investment stance.<<< |
