FWIW, my college roommate works for Smith Barney (and I keep some money in an account with him out of friendship). He's usually pretty good about his assumptions on market direction, though I question his current analysis a bit.
Basically, his primary clients (accounts of $1mm or more) are rolling money out of bonds and fixed income assets and back into equities. The downside in fixed income is considered much higher than in equities (this is where I raise my eyebrows, but his rationale is pretty good). Basically, at current interest rates, it would take a halving of rates in TBills to double your capital. That isn't likely. And even if it did occur, where do you go from there? You can keep halving forever, obviously, but the bottom has to be hit eventually.
On the other hand, the more likely scenario is a 50% increase to 100% in rates. That implies up to a halving of capital. The question is then asked - are stocks likely to get halved? Possibly they will go down, but halving is unlikely...it seems the bottom is in, so upside seems more likely.
Well, that's the scenario his clients are painting for him...c'est la vie. I remain solidly neutral about current conditions. His feeling is one more down move then watch the market after Sept. 1 as we get an election year bull. |
