There are interesting articles in this weekend's Barron's magazine for both bulls and bears alike. For the bulls, Michael Santoli wrote an article Lift Off, Already! Message to the Market (subscription required). In this article most of the Wall Street strategists comment that they are bullish and expect the market to rally five to ten percent in the last four months of the year. I found the energy comment interesting.
The energy story also is central to evaluating stocks' performance this year. So far in 2005, a portfolio that lacked energy stocks would have suffered mightily. Excluding its energy components, the S&P 500 is down nearly 10% since Jan. 1, a remarkable loss given energy stocks account for a mere 9% of the index's value.
Next for the bears, Sandra Ward interviewed Lee Mikles and Mark Miller, Mikles/Miller Management, for an article The Big Hook (subscription required). Their basic theme is that consumer are tapped out and that the recent negative savings rate confirms that consumers are tapped out. Consumers have enjoyed the rapid rise in housing prices with the consequent mortgage refinancing to support an unsustainable spending pattern.
As I have mentioned in other articles in my blog I am cautious, though not pessimistic, in my outlook. One of the largest dangers for an investor, in my view, is becoming too anchored to your own beliefs and not being adept or agile enough to change when circumstances change. Compounding that danger is that a negative outlook always appears to be more rigorous, more factual. Bears can always point to cracks in the system and why things are failing. Always. Bulls always require a bit of faith looking out to the future. The current trajectory of positive news must continue. The fact is, more often than not the future is positive and the economy continues to grow and expand. Thus our challenge is to weigh the arguments for a decline or stagnant economic outlook against the arguments for a positive economic outlook.
I think now is a particularly challenging environment because there are many crosscurrents. There are strong cases to be made for either a bullish or bearish outlook. It should be an interesting fall season.
Leave a comment