To: Zeev Hed who wrote (1067 ) 10/21/2001 3:53:08 PM From: marginnayan Respond to of 99280 S&P OUTLOOK - Better Days Ahead Substantial monetary and fiscal stimulus should prop up the economy Arnie Kaufman is editor of Standard & Poor's weekly investing newsletter, The Outlook Date 10/19/2001 Risks, obviously, are high. The recession, terrorism and the market disappointments of the past 18 months make it impossible to confidently take a positive stand on stocks now. Still, there's a good chance that the bear market low was seen on September 21 and that we are in the stage when stocks move upward, if irregularly, in anticipation of a business recovery. While some prominent companies last week met or exceeded recently lowered earnings expectations, we wouldn't count on a lot of upbeat reports in the period ahead. We at S&P now expect third- and fourth-quarter GDP to fall 0.8% and 2.0%, respectively, vs. our earlier forecast of 0.6% and 1.6% declines. We have further cut our estimate of 2001 operating profits of companies in the S&P 500 to a 23% decline from the 2000 level. Bear markets end, however, well before the news generally improves and earnings turn upward. Investors begin placing bets that the combination of monetary ease and natural cyclical forces will pull the economy out of its slump. This time around, the Fed has been easing unusually aggressively, and when the federal tax cuts and spending programs finally get through Congress, the overall stimulus will be massive. The anthrax scare last week stalled a rally that was already meeting resistance from overhead supply of stock. Still, the pullback was modest and orderly. S&P technical analyst Mark Arbeter says it's common for as much as 50% of the gains in the key market indexes to be retraced before the uptrend resumes. The halfway points are 1026 on the S&P 500 (now at 1073) and 1570 on Nasdaq (currently 1671). Seasonal influences should soon become more favorable. Historically, market gains in the six months from November through April have exceeded by a good margin those from May through October. This may prove to be an opportune time to accumulate depressed stocks with good long-term potential.