I observe market sentiment is not where it was, but we called for an advance of gargantuan proportio...
S&P's Top Picks and Market 'Outlook'
11/01/2002 12:00 am EST
Analytical independence has long been the watchword for Standard & Poor’s, the world’s leading provider of research and analysis. While many are embroiled in the battle between research and investment banking, we'd note that this 140-year old firm is not a brokerage, underwriter, or fund and has no conflicts of interest. It strictly provides unbiased advice. In a special panel at The New York Money Show, the team behind S&P's The Outlook offer their 'outlook' and top picks.
Sam Stovall, chief investment strategist for S&P, notes, “Can investors feel optimistic in this environment? If you use history as a guide, I’d say ‘yes, there are reasons for optimism.’ Certainly, we are not going back to the races as we were many years ago, but I certainly believe that the bias is likely to be on the upside once again.
“Have we bounced back too quickly? No, quick bounce backs are normal. Going back to 1949, we have found that three months after bear markets have ended, the stock market rises an average of 13%. Six months later, it is up an average of 24%. If you look back at prior bear markets and analyze the action in the following bull markets, you would see that in the first two months you tend to regain one-third of what had been lost in the prior bear. Six months after, on average, you have recovered about two thirds of the previous bear market losses and on average about one year later, you have recovered about 95%. So usually about one year after a bear market has ended – and you are in a new bull market – you have recovered almost all of the losses from the prior bear.
“What kind of rally can we expect? If history were to repeat itself, we would see the strongest gains in consumer discretionary stocks such as retail, autos, and homebuilding. These are the kind of stocks that typically perform the best, rising an average 55% in the one-year period after a bear market has ended. We still think there is a lot of life left in the homebuilding area, as well as in the home environment stocks. Even when homebuilding peaks, you still have demand for home improvement and home furnishing stocks for another 12 to 24 months.
“Consumer staples, including food, alcoholic beverages, and tobacco also tend to do well coming out of bear market. We also like energy stocks. Because of an improving economy, we still think that energy stocks have life left in them. We also like materials, such as packaging and metals, because they are economically sensitive and are likely to do well. And while technology is very different today than prior to 1990, history does indicate that technology will be a good performer coming out of a bear market.”
Kevin Gooley, senior market strategist for S&P, summarizes five current favorites:
"Fortune Brands (
"Kraft Food (
"Ocean Energy (
"Ambac Financial (
"Triad Hospitals (
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