Trend-spotting across borders
LONDON (FTMW) - This has been the most volatile year ever for stocks -- across Europe and the U.S.
I checked in with The Online Investor, a small California shop whose operators have been tracking markets for 25 years. Hey, they're stumped, just like everyone else. Ted Allrich, one of the founders, just asks, "Will this storm turn into a hurricane or, to mix a metaphor, a total meltdown? Who knows?"
This on the part of professional and individual investors. The latest figures from the world's major exchanges show investors are increasingly unwilling to hold their winners or their losers for more than a few months.
Here are some trends to look for at year-end and through 2001.
1) The euro was the currency that couldn't. Even the Danes said they wanted no part of the sickly thing. Yet contrarian fund managers believe the euro will rise as European economies continue their strong worker productivity gains. This will benefit some European companies and their share prices. Americans can gain by investigating companies such as British Airways (BAB: news, msgs).
2) Investors will start to question just how stocks, especially technology stocks, boomeranged so sharply this year. One finger-pointing theme making the rounds centers on Fed Chairman Alan Greenspan, who flooded markets with liquidity in the run-up to the Millennium Bug scare a year ago. The easy money surged into stocks and real estate from November 1999 through March 2000. When Greenspan and other central bankers started pulling in the money supply and raising interest rates, the liquidity boom ended. Look for real estate prices, residential and commercial, to slide next.
3) Bonds will fare far better than stocks in 2001. That's because developed economies will see slow but steady growth. Bond investors love slow-mo growth. Look for European and U.S. economies to grow between 3 percent and 3.5 percent each of the next two years. That's enough to keep runaway inflation at bay and keep most bond investors profitable.
4) U.S. community and regional banks will get snapped up by international banks such as ABN Amro and by their competitors. Keep an eye on any small or mid-sized bank that sells for less than 2 1/2 times book value or operates what looks like a depressed franchise. Civic BanCorp (CIVC: news, msgs) in Oakland, Calif., just reported record third-quarter earnings yet has seen its shares idle for much of the year.
5)The possibility of a sharp drop in the value of the dollar or a crash in yen could rattle markets throughout the year. I personally think that will be good for gold mining stocks such as Placer Dome (PDG: news, msgs), but I'm only one of 23 people in the world who share that belief. Several gold pundits are looking for an explosive year for the fading metal. Gold prices have lingered in the $265-an-ounce range since mid-October.
6) Old economy stocks around the globe will continue their recovery as technology stocks, victims of slowing demand for personal computers and lighter corporate spending on equipment, languish. Personal and corporate bankruptcies and the threat of an Asia-led recession will keep stock market gains in Western Europe and the United States limited to about 5 percent for next year.
7)Several types of companies, mostly in retail, will still thrive amid the turmoil. One of them could be Starbucks (SBUX: news, msgs), the international retailer that is enjoying thicker profit margins as it raises prices on its coffee products. Another is Mothercare , a British company that sells baby products to a captive urban audience of frantic parents. Mothercare finally turned the corner, recording a half-year profit of 2.2 million pounds compared to a huge loss one year ago.
Finally, individual and fat-cat investors who were sitting on vast gains in early 2000 will go into severe depression when they see their tax accountants. Or get their next margin call. Let's hope their need for cash doesn't add fuel to the fire that is consuming Nasdaq, the Neuer Markt and other high-growth exchanges around the world.
Bargain hunters beware. At The Online Investor, analyst James Hale advises investors to be cool about looking for a year-end bargain on Yahoo (YHOO: news, msgs) or other badly beaten stocks. "It may be a good, strong company with tremendous profit growth and a stock price that seems unjustly low, but that doesn't mean it can't go lower. It can, and often will," says Hale.
Happy trend hunting. |
