Polls show President Bush possibly losing re-election. U.S. soldiers are being killed on a daily basis as we revisit Vietnam in the Middle East.Say what? Oh, wait... this is SeeBS. Nevermind.
Posted on 11/07/2003 8:52:23 PM PST by SierraWasp
Riding high
Confidence is soaring, but are we over the 'Wall of Worry'
By Shawn Langlois, CBS.MarketWatch.com Last Update: 7:28 PM ET Nov. 7, 2003
SAN FRANCISCO (CBS.MW) - U.S. investors suddenly seem to be seized by an unbearable lightness of being.
Judging from soaring investor-confidence levels, they've chosen to ignore the types of concerns that a year ago fed grave fear -- and sent the U.S. stock market to its post-2000 low.
Wall Street is plumbing new depths of corruption with the mutual fund scandals. Polls show President Bush possibly losing re-election. U.S. soldiers are being killed on a daily basis as we revisit Vietnam in the Middle East.
Yet a wave of optimism is washing over the market, born of improving economic data and corporate earnings and the belief the Fed will keep interest rates low into the near future, said Roger Tutterow, Professor of Economics at Kennesaw State University.
The sense is that "consumers are on the sideline with a big pile of cash and sooner or later, they're going to jump in like they did in the latter part of the 90's," Tutterow said.
Investor sentiment has turned to "extreme optimism," according to readings from Ned Davis Research Check Net Sense. Market bulls outnumbered bears by a 5-to-1 ratio last month, according to the WILink PrecisionIR Investor Confidence Index. That's up from 1-to-1 in February, and half of the 10-to-1 level in early 2000.
"People who've been hesitant because of the uncertainty are feeling much more comfortable about investing new money," said Derrick Kinney, a financial advisor at American Express.
Yet some market observers wonder whether investors aren't suddenly blind drunk, throwing caution to the wind too quickly in response to having embraced it so tightly, for so long.
Corporate earnings are making a comeback, but not enough to justify current stock prices on a historical basis. The geopolitical situation has improved, but it's nowhere near stable. The Fed seems to be in the market's corner, but that could change in a Greenspan heartbeat.
And that's not factoring in more unsettling developments that could be in the offing.
"There's always the big exogenous shock risk -- the unforeseen terrorist attacks, SARS, etc.," Tutterow said. "The types of things that hit the economy in the past few years are certainly still out there."
Many investors have apparently turned numb to the onslaught of bad news, making for hubris on Wall Street. In fact, on the very day the revelations about fund industry malfeasance peaked, so did major stock indexes.
The Nasdaq enjoyed one of its best days of the year Monday, hovering just below the key 2,000 level. The Dow also flexed its muscles, continuing to inch toward the key 10,000 mark.
The surge also took place a day after the most deadly "postwar" attack to date, in which 16 soldiers were killed west of Baghdad. That brought the U.S. body count to 379 -- 241 of whom died since Bush declared an end of major combat operations.
Confidence booms
Rupert Thompson, market strategist at E-Trade, expects this year's investor-confidence rise to be "vindicated" in the near future. E-Trade's Stock Market Outlook Index jumped 17 points to 61.51 in the last quarter alone, the highest point since its inception a year ago. A reading of 50 indicates a neutral outlook.
"The economy will continue to pick up speed as business increases capital spending and rebuilds inventories," Thompson said. "This recovery, in turn, should fuel strong earnings growth and could fuel a further rally in the stock market."
The State Street Investor Confidence Index, which focuses on institutional investors, is another recently created gauge. Apparently, measuring market confidence wasn't on financial firms' radar before the market's collapse. The State Street index is up sharply since January, rising to 104.2 from 87.2.
"We basically track how much people are willing to blow their portfolio up like a balloon," said Ken Froot, a Harvard professor and co-developer of the index.
Many investors are betting on solid economic growth over the next few quarters, Froot said. "So if the economy doesn't deliver, what happens next?"
Fiddling away
Some investors insist the flow of news remains disconcerting, and that confidence in the economy is unfounded.
An investor called Cynical, who's taken on bulls on CBS MarketWatch's message boards for years, argues that more corporate scandals, lukewarm holiday spending and rising interest rates will play a part in sobering market revelers.
"The illusion will continue through the end of the year," he said. "We may even see a breach of the 10,000 level on the Dow, and 2000 on the NAZ as the institutions make a pitch to have a romping end of the year gain."
"But come January, watch out for the Wall Street mortars which will come flying in all directions, pointing to a downward slide of the indices back towards the 52-week lows."
This ringer of the bear bell seems to be in the minority, judging from the resistance he meets in cyberspace on a daily basis.
Shawn Langlois is a reporter for CBS.MarketWatch.com, and the editor of its community message boards.
Not if Dan Blather and his ilk have anything to say about it. I vividly remember how he made out the 1992 economy to be nothing short of a cataclysm.
Their hubris never ceases to amaze me!!!
Polls show President Bush possibly losing re-election. U.S. soldiers are being killed on a daily basis as we revisit Vietnam in the Middle East.Say what? Oh, wait... this is SeeBS. Nevermind.
"SeeBS, PeeBS, not much difference. That John McLaughlin is getting goofier and goofier! Him and Pat Buchannan keep bashing Bush like a couple of flaming Libs!
I'm beginning to thing they should change his name to John McLaughin!!!
I get so fatigued by some of these perpetual pissant pantloads squakin and squealin at EVERYTHING Bush does.
I gripe occasionally and am not a Bush-Bot, but people including some conservatives who knee-jerk against him at every turn, really grate on a person after awhile!!!
Oh, WOW Grandpa, that is one fantastic cartoon. Worth way more than a thousand words. Sums up the situation perfectly!!
What'er you doin up at 3:AM? Are you the "Early Bird" tryin ta git the worm?
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