Happy New Year, CFZ'ers!
Upon awakening in 2003 for the first time, I moseyed outside and picked up the local fishwrap, this article was the first thing my bloodshot eyes fell on:
arizonarepublic.com
Some analysts already bullish on Wall Street
Staff and wires
Jan. 1, 2003
The numbers came tromping out of Wall Street on Tuesday like ugly trolls:
Dow Jones industrials for 2002: down 16.8 percent, the worst since 1977.
The tech-heavy Nasdaq composite: down 27.5 percent.
The sweeping Standard & Poor's 500: minus 23.4 percent.
It was a fitting end to a year that further sapped the stamina of investors, who have suffered three straight years of stock-market losses.
But they might take heart in what some analysts are expecting in 2003: a return of the bull.
With positive reports on earnings and the economy occurring more often, and fewer new instances of corporate scandal, the market's optimists believe stocks will start charging again. But other more cautious analysts warn against unrealistic expectations: A bull in 2003 will likely be tamer than the one that sent stocks roaring in 1999.
Charles H. Blood Jr. is among the most upbeat about Wall Street's prospects. "We are now in the first part of the bull market," said the senior markets analyst at Brown Brothers Harriman & Co.
Brinker Capital also expects a robust year on Wall Street. "We think double-digit returns are a real possibility," said Barker French, the company's chief investment strategist.
Wall Street would certainly welcome a positive year after the dreadful 2002. The Dow has seen a three-year drop of 27.5 percent, and the Nasdaq a fall of 66.9 percent. The S&P sank 40.1 percent over the past three years.
"We're in the process of climbing a big wall of worry," said Barbara Walchli, Phoenix-based portfolio manager of the Aquila Rocky Mountain Equity Fund, who nevertheless thinks a new bull market has begun.
"The economy obviously is dealing with a hangover from the last (growth) cycle."
Analysts said the market has several factors in its favor going into 2003, among them improving earnings, a strengthening economy and interest rates low enough to motivate companies and individuals to spend more.
Wall Street also has history on its side. Four-year slides are rare; so much so that the Dow has seen only one, which spanned 1929 through 1932. And there have been only two three-year declines: 1901-1903 and 1939-1941.
And, after three years of declines, it won't take much to qualify as a bull market.
Analysts optimistic
"We have been saying it will be the year of the bull for the last three years. Eventually it will be. . . . I do think (this) year will see some positive returns for the overall market," said Robert Froehlich, chief investment strategist for Deutsche Asset Management.
Although many analysts were bullish going into 2002 and 2001, Froehlich said, this year is different for two reasons. Lower interest rates, the result of a total of 12 cuts by the Federal Reserve, have had more time to work their way into the economy, and the new Republican-controlled Congress is expected to cut taxes for firms and individuals.
"That presents a much different backdrop than we have had in the past three years," he said.
Analysts are also optimistic that greater pressure on companies to report accurate earnings will restore investors' faith in the market and prompt them to buy stocks with renewed enthusiasm. At times this past year, investors were so shaken by corporate scandals that they ignored signs that the economy was strengthening.
"We had an opportunity to really see the market rebound (this year) . . . but there was no confidence in earnings because of corporate fraud issues. That is what put us into the third year of declines," said C. Kim Goodwin, chief investment officer at State Street Research. "I am optimistic about next year because investors are more confident."
Return of double digits?
Besides, stocks aren't facing a lot of competition from certificates of deposit and money-market funds now yielding just 1 percent to 2 percent. Bonds are paying a bit more but, like stocks, could suffer capital losses if interest rates rise.
Goodwin sees the market posting a 10 percent return this year, in line with the historical average of the broad market represented by the S&P.
Brown Brothers Harriman's Blood is more bullish, forecasting percentage returns in the high double digits: about 20 percent for the broad market and 24 percent for technology, where stock prices are extremely low and in many cases are under $10 a share.
Froehlich, of Deutsche Asset Management, predicts techs will rise at least 10 percent next year, possibly 20 percent, because of low stock prices and the demand for new products. The technology sector has been hit particularly hard by the market downturn.
"With stocks down 70 percent, you have a pretty good floor to work from," he said, adding that throughout the bear market, companies and individuals have put off buying new computers and that there is a great deal of pent-up technology demand.
Still, pessimists argue that stock valuations still haven't dropped to the bargain-basement levels typical of past nadirs. After nine straight up years during the 1990s, it could take more than a three-year slide to put the market back into equilibrium, they argue.
Scottsdale investment adviser Stanley Rulapaugh cautions investors not to expect a repeat of the hefty double-digit gains of the late 1990s.
"You need to be realistic about the expected returns going forward," he said.
Yep, guess everyone is still pessimistic! Or as the Who would say, "Meet the New Year, same as the old year...."<NFG>
EDIT: Nice special on Tulving today on 1 oz Maple Leafs, it's open for another hour. Good for all those who resolved to invest in reality for 2003...
tulving.com |
