This week’s Barron’s cover story asks the question: “Is the party on, or is it over?”
“For the past four months, bulls and bears have tussled over the fate of the U.S. stock market, marshaling their arguments — and buy and sell orders — with uncanny symmetry. On the bright side, corporations are churning out higher profits, while the economy, having cast off its crutches, has broken into a run. Yet prices for goods are rising, with interest rates likely to follow, and the specter of violence abroad is casting a lengthening shadow at home.”
Who are the “unequivocally upbeat,” as Barron’s calls them? The Pros: “More than 61% of the investment professionals responding to Barron’s latest Big Money Poll call themselves bullish or very bullish about the prospects for U.S. stocks through the end of this year.”
Its seems that this group — only lightly less bullish then they were in the Fall ’03 — are maintaining their “lofty expectations.” Barron’s noted that the polling respondents were “optimistic about the economy and corporate earnings, expect the Dow to reach 11,042 by year end, which would represent a 6% annual increase. They predict the S&P will close the year at 1212, for a 9% gain before dividends, and think the Nasdaq Composite will reach 2146, up 7%.”
Other Asset Classes
Barron’s also notes that almost “half the managers are neutral on the investment prospects for oil, though more than half favor other commodities. In fact, almost 70% expect the current bull market in commodities to continue for the foreseeable future.”
As we showed in a chart of commodities a few weeks ago, the Bull market in commodities started in October 2001. While the commodities chart has not yet shown its Bull run to be over, one cannot help but notice that this group is very late to the party.
So too, for the overseas stocks: 32% of the group are bullish on Latin American equities — “many of which were outstanding performers last year,” noted Barron’s. Few poll participants had a kind word for bonds. Seventy-three percent declared themselves bearish on Treasury bonds, and even more — 77% — disdain corporates at this juncture. The managers largely are neutral, though not bearish, on European stocks, real estate and cash.”
Here’s something else amusing: “A growing percentage of money managers say they’re bullish on the dollar, a marked change from six months ago.” The Dollar is in the midst of a countertrend rally — it was falling, got oversold, and now is temporarily snapping back. I expect the slide to start again eventually.
Getting ready for the bull’s next run
By Jack Willoughby
Barron’s, Monday, May 3, 2004
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