The market and exchange traded funds (ETFs) had been on a six-week winning streak that paused this week. That has some wondering what happens next: will it continue, or will we resume the downward slide?
Earlier this week, stocks in the United States began to lose some steam, disappointing many after a hopeful six-week run. Once again, the health of the financial sector is in question and investors are wondering where to park their capital. BusinessWeek staff talks to four Wall Street strategists about whether the blips this week were a detour or the end of the line.
- Phillip Roth of Miller Tabak, an institutional trading firm: The bulk of the gains came at the start of the six-week run, and three-fourths of the advance to date came in the first third of that time. Many of the biggest gainers have been in the most depressed stocks, including many financial and consumer discretionary stocks. Energy, basic materials, capital goods and transportation issues have not had much of a recovery yet.
- Alexander Young of Standard & Poor’s: According to S&P’s strategy, fundamental improvement has now been priced into worldwide stock market valuations. In one-years’ time the markets will be higher, but for the time being, the recent advance may consolidate and investors will wait for more definite signs of a recovery.
- Tobias Levkovich of Citigroup: As of last week, a survey indicated that two-thirds of respondents wanted to add more equities to their portfolio, with expectations that the equity market would add on an additional 6%-7% by year’s end, shy of their view looking for 15%. Emerging markets are expected to outperform U.S. equity indexes.
- Tony Crescenzi for Miller Tabak: The runup in stock prices has not been great for banks, because there has not been an increase in bank loans, in terms of both lending and demand. Instead, banks have raised their cash balances, which in the latest week were $1.02 trillion, up from $865 billion in November.
Wherever the markets are going, just sit tight and stick to your strategy, whatever it may be. We’re continuing to watch the 200-day moving average to look for opportunities.
What do you think about where we stand? Discuss it in our forums.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.