Analyst Comments
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"With tax-loss selling concluded, money flows expected to pour in at the start of the year and the Fed expected to ease, you can make the case for a more stable market come January," said David Powers, senior technology analyst at Edward Jones.
"But as long as companies continue to lower their earnings guidance going forward, the upside will be capped. We need to see earnings estimates stabilize in order for the market to enjoy a sustainable rally," Powers continued.
Still, Powers said many companies have already factored in a good deal of bad news and have seen their valuations come down substantially.
Robert Dickey, chief technical strategist at Dain Rauscher, said the weight of year-end selling strategies is being lifted off the market's shoulders, which should bode well for the indexes over the short term.
"Many stocks will bounce more than the indexes, especially those that have had the most incredible downtrends. The markets will look better for the next month, but will require several more months of work in the form of a bottoming and basing period before a longer-term uptrend can begin," Dickey said.
YEAR 2001 OUTLOOK FROM SEVERAL ANALYSTS
Strategists bullish
A number of influential Wall Street strategists came out with extremely bullish forecasts for the year ahead, encouraged by signs that the Fed may be close to cutting interest rates.
Ed Kerschner, chief global strategist at UBS Warburg, said 2001 would be "one of the five most attractive opportunities of the past 20 years." He still expects the S&P 500 to rise to 1,715 by the end of next year, a roughly 24-percent gain from current levels.
While Kerschner said the chaos surrounding the presidential election can still make this cheap market even cheaper in the near term, he said he believes stocks have reached their most attractive levels since the 1998 financial crisis.
Market volatility is still expected to stay high throughout 2001 with "normal" profit growth expected. In fact, Kerschner sees S&P 500 operating earnings-per-share growth of 7 to 8 percent in 2001.
"Very selective buying of new economy stocks with real profitability prospects may be in order. Established big-cap tech stocks are at extreme levels of undervaluation," he said in a note to clients.
Meanwhile, Credit Suisse First Boston's Tom Galvin noted that policy directives are shifting toward a monetary easing. Thus, he said, investors bracing for a hard landing must take a step back with a Fed now on alert.
"It is time to re-evaluate and cover some short positions because the probabilities of rate cuts and an orchestrated soft landing have risen decidedly," Galvin told clients. He maintains a 12-month S&P 500 price target of 1,600.
And Lehman Brothers' Jeffrey Applegate said the stock market is significantly undervalued, noting that Fed chief Alan Greenspan's comments last week and subsequent actions should help the stock market recover to fair value.
Finally, Morgan Stanley Dean Witter's Byron Wien said very oversold conditions suggest the market is poised for a rally. Still, while in the short-term there are many reasons favoring an advance, Wien said he's skeptical that the uptrend will be sustainable.
"Longer-term, even if the Fed does lower rates, I think the market can go down. I would be careful here and would consider selling certain stocks into a tech rally if it occurs," Wien said.
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Merrill's 2001 outlook
Merrill Lynch told investors at its annul outlook gathering that it expects the economy to stage a soft landing in 2001. Chief economist Bruce Steinberg expects the Fed to ease policy, dropping the fed funds rate to 6 percent from the current 6 1/2 percent target. Steinberg added that the risk of a recession is low.
Merrill's chief quantitative strategist Richard Bernstein suggests that U.S. investors be overweight consumer staples, healthcare, high- quality financials, aerospace/defense, utilities and energy while underweighting in technology and telecom issues.
And chief market analyst Richard McCabe still favors gradual accumulation in old economy, value and mid-to-small cap sectors of the marketplace. He said he believes value investing will continue to do well over the next several years.
Finally, Merrill's technology strategist Steve Milunovich said that while he remains bullish on technology for the long term, valuations in some sectors are still high.
greetings
proxi
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"With tax-loss selling concluded, money flows expected to pour in at the start of the year and the Fed expected to ease, you can make the case for a more stable market come January," said David Powers, senior technology analyst at Edward Jones.
"But as long as companies continue to lower their earnings guidance going forward, the upside will be capped. We need to see earnings estimates stabilize in order for the market to enjoy a sustainable rally," Powers continued.
Still, Powers said many companies have already factored in a good deal of bad news and have seen their valuations come down substantially.
Robert Dickey, chief technical strategist at Dain Rauscher, said the weight of year-end selling strategies is being lifted off the market's shoulders, which should bode well for the indexes over the short term.
"Many stocks will bounce more than the indexes, especially those that have had the most incredible downtrends. The markets will look better for the next month, but will require several more months of work in the form of a bottoming and basing period before a longer-term uptrend can begin," Dickey said.
YEAR 2001 OUTLOOK FROM SEVERAL ANALYSTS
Strategists bullish
A number of influential Wall Street strategists came out with extremely bullish forecasts for the year ahead, encouraged by signs that the Fed may be close to cutting interest rates.
Ed Kerschner, chief global strategist at UBS Warburg, said 2001 would be "one of the five most attractive opportunities of the past 20 years." He still expects the S&P 500 to rise to 1,715 by the end of next year, a roughly 24-percent gain from current levels.
While Kerschner said the chaos surrounding the presidential election can still make this cheap market even cheaper in the near term, he said he believes stocks have reached their most attractive levels since the 1998 financial crisis.
Market volatility is still expected to stay high throughout 2001 with "normal" profit growth expected. In fact, Kerschner sees S&P 500 operating earnings-per-share growth of 7 to 8 percent in 2001.
"Very selective buying of new economy stocks with real profitability prospects may be in order. Established big-cap tech stocks are at extreme levels of undervaluation," he said in a note to clients.
Meanwhile, Credit Suisse First Boston's Tom Galvin noted that policy directives are shifting toward a monetary easing. Thus, he said, investors bracing for a hard landing must take a step back with a Fed now on alert.
"It is time to re-evaluate and cover some short positions because the probabilities of rate cuts and an orchestrated soft landing have risen decidedly," Galvin told clients. He maintains a 12-month S&P 500 price target of 1,600.
And Lehman Brothers' Jeffrey Applegate said the stock market is significantly undervalued, noting that Fed chief Alan Greenspan's comments last week and subsequent actions should help the stock market recover to fair value.
Finally, Morgan Stanley Dean Witter's Byron Wien said very oversold conditions suggest the market is poised for a rally. Still, while in the short-term there are many reasons favoring an advance, Wien said he's skeptical that the uptrend will be sustainable.
"Longer-term, even if the Fed does lower rates, I think the market can go down. I would be careful here and would consider selling certain stocks into a tech rally if it occurs," Wien said.
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Merrill's 2001 outlook
Merrill Lynch told investors at its annul outlook gathering that it expects the economy to stage a soft landing in 2001. Chief economist Bruce Steinberg expects the Fed to ease policy, dropping the fed funds rate to 6 percent from the current 6 1/2 percent target. Steinberg added that the risk of a recession is low.
Merrill's chief quantitative strategist Richard Bernstein suggests that U.S. investors be overweight consumer staples, healthcare, high- quality financials, aerospace/defense, utilities and energy while underweighting in technology and telecom issues.
And chief market analyst Richard McCabe still favors gradual accumulation in old economy, value and mid-to-small cap sectors of the marketplace. He said he believes value investing will continue to do well over the next several years.
Finally, Merrill's technology strategist Steve Milunovich said that while he remains bullish on technology for the long term, valuations in some sectors are still high.
greetings
proxi
