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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum
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To: Dave Gore who wrote (4115)2/8/2001 11:43:50 AM
From: Lane Hall-Witt  Read Replies (1) of 6445
 
Dave: It's been a pretty interesting day. My basic feeling is that the market wants very badly to believe in Greenspan and the tax cut -- that they can turn the economy around on a dime. The buy-the-dips mentality we've been seeing is, I think, coming from these believers.

The question is: can the downward momentum in the economy really be reversed as quickly as the market seems to think will be the case? In other words, can the economy resume its pattern of accelerating growth by the second half of 2001?

My personal belief is: no way. Companies across the U.S. economic spectrum are announcing massive layoffs. Even CSCO has put a hiring freeze into effect! This inevitably will have a dampening effect on consumer confidence -- as we've already been seeing -- and we have to remember that it is consumer confidence that has driven this economy for the past decade. I just don't see any way to turn this problem of consumer confidence around in the next three months or six months. Perhaps by the second or third quarter of 2002. But three to six months from now? Highly unlikely--.

I'm near-term positive on the market because I think it believes in Greenspan, believes in the tax cut, and thus believes the economy will be roaring by July or August. However, I'm also watching for the market to confront the reality that it's going to take longer than expected for growth to begin accelerating upward again, because I would expect the market to suffer again as it prices in that realization.

This is a bizarre position to be in because I see the market buying the dips on hope -- and I'm happy to take advantage of this near-term optimism -- but I ultimately believe the hope is misguided and that the market will eventually price in another round of despair.

I guess the moral of this story is: buy and sell the charts!
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