Commentary--Elaine Garzarelli for 10/13/00...
garzarelli.com
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Edited for emphasis and ease of reading.
>>>Stock market analysis for October 13
Mideast violence, earnings concerns, higher oil prices, a falling euro, and an Asian crisis possibly returning is causing much volatility in the stock markets.
As of yesterday's closing prices, the S&P 500 and the Nasdaq are below their previous lows (2% and 3%, respectively).
As far as the economy is concerned, we believe the previous string of Fed tightenings has slowed the economy to a perfect pace (not too fast and not too slow).
The retail sales report released today showed sales climbed 0.9% in September (ahead of forecasts).
The PPI also released today showed prices paid to U.S. producers rose 0.9% due to higher oil, car and food costs.
However, there is much news of the slowdown including lower manufacturing unit labor costs, higher loan loss levels, slower new home sales, and over 145 central bank tightenings globally over the past 16 months.
We believe we are nearing the END of this stock market correction cycle and believe the Fed is finished raising rates and may even ease if the market drops even further.
Our indicators are rising (currently 60%) from a cautious 28%.
Above 65% would be a buy signal.
Our quantitative computer models (developed and used over 20 years) determine industry earnings and valuations.
We then recommend the groups whose earnings growth is better than the S&P 500's and whose valuations are below their normal ranges.
That way we are sure to choose good value groups with strong earnings.
This methodology is what we use for our fund Forward Garzarelli Equity (FFDEX) which has had excellent performance.
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Interest rate/bond market analysis for October 13
We are optimistic that growth and inflation will remain at levels that the Fed is comfortable with and will not have to raise rates any further.
Our bond model correlates the CPI inflation rate and the surplus as a percentage of GDP to forecast the 10-year yield. It continues to show that bonds should be part of one's portfolio.
We believe bonds yields have peaked since they normally do when near the end of the Fed tightenings.
Our bond model predicts 10-year yields should decline to 5.2% to 5.4% by the end of next.<<< |
