Where's the Market Going?

05/16/2003 12:00 am EST

Focus:

Digest readers have sent us very nice e-mails in favor of our "Briefly Speaking" section in which we cover short and concise stock advice from a select group of advisors. Here, in our "Where's the Market Going?" section we offer the same quick overviews, focusing on market direction and the latest outlook from some leading market forecasters. We will continue to feature both sections in future issues.

Parker, Sharon"Uncertainty overhanging Iraq has lifted and the media is already searching for new attention-getting headlines," notes Sharon Parker, editor of UnDiscovered Stocks. "Don't be surprised if you start to hear more talk about an economy that has lost direction. But, take it with a grain of salt. Indeed, a post-war rebound may already be forming, and I am not only seeing good profit results for the year to date, but also expect solid earnings looking forward."

Janjigian, Vahan "Crude oil prices have fallen back to year-ago levels and lower oil prices are fundamental for global economic growth," says Vahan Janjigian, editor of the  Forbes Growth Investor. "We are also seeing a large and unexpected jump in consumer confidence, and improving stock prices. Further, investors are pleased with favorable earnings reports. Just as important, the quality of earnings is much improved as managements downplay pro forma figures and spotlight GAAP earnings instead. All in all, the positive factors outweigh the negatives, and we remain bullish on stocks."

Weiss, Martin"Is this the bottom?," asks Martin Weiss, editor of Safe Money Report.  "Highly unlikely. Recent earnings may seem to be beating the lowered expectations of analysts, but they are falling overall. Many major corporations will be forced to take massive earnings hits to fund their pension plans. US consumers are being strangled by debt. And corporations are still buried under record debt. In addition, over the past 100 years, S&P 500 stocks have sold for an average of 14.75 times earnings. Today, the average stock is going for a whopping 30.5 times earnings. At today's levels, the Dow would have to fall to 4931 before stock prices are restored to their historical norms."

Murphy, John"Money tends to leave low-yielding currencies (like ours) and moves to higher-yielding currencies like the Australian and Canadian dollars as well as the Euro," says John Murphy, editor of Stockcharts.com. "Their strong currencies aren't a sign of their strength, but of our weakness. That's why their stock markets haven't been doing any better than ours. The biggest problem for us is that a weak dollar causes foreign investors to pull money out of US bonds and stocks. They've already been doing that for several months. That doesn't mean the stock market can't go up from here. But it does mean that any upside progress will probably be limited. As we've said repeatedly, the market that gains the most from a falling dollar is gold. It's no surprise that gold prices have surged as the dollar fell. We continue to believe that gold is in the early stages of a new bull market."

Skousen, Mark"I urge you to maintain a conservative strategy of 50% income investments, 40% selective stocks, and 10% precious metals," says Dr. Mark Skousen, editor of Forecasts & Strategies. "Our income investments have been especially strong and gold is showing strength again. A combination of victory in the Middle East and better-than-expected corporate earnings are driving the market higher. We are also seeing some optimistic signs of recovery in the US. Despite weakness in the global economy, so far S&P earnings have exceeded expectations. In our view, the bear market may be coming to an end."

McMillan, Lawrence"The market has continued to rise, despite what are universally recognized as overbought conditions," notes Larry McMillan, editor of The Option Strategist.  "Strong bullish phases often begin with overbought conditions. Pullbacks from them are usually of limited time and distance, before another bullish wave occurs. This particular market has not yet suffered even such a modest pullback, so perhaps one is due - especially since the broad averages have run into resistance at the January highs. In summary, then, we remain bullish in line with our technical indicators."

Gue, Elliott"The recent excuse for bad earnings was the war.  Last year, the excuse was corporate governance issues and Enron. We believe that the problems remain more deep-seated and related to an economic adjustment in the wake of one of the largest financial bubbles in history. Any major rally will offer an outstanding opportunity  to get short ahead of a summertime selloff, which economic worries could again take center stage."

Frank, Walter"The time has come to shed bear psychology.  It is not easy after this long bear market.  What does this mean in practice? Obviously, it means reviewing our asset allocation. If we get a tax cut, as we believe we will, and if the economy behaves the way we expect, then we should see a substantial increase in profits later this year and into the first half of next year.  That is what the market is discounting now.  We do not want to imply that risk no longer exists. But the bubble is over and will not return. Optimism is now warranted."

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