The Bear Market is Over- The Bull is Back!
Corporate performance has been dismal as the economy continues to wrestle with the
current slow down. One wonders why stocks would begin to come back with no sign of an
economic rebound? The answer is simple and can be found by examining events of the
past year.
Understanding The Past To Predict The Future
One year ago the NASDAQ was testing 3000, down from the high of 5200 in March. This
drop correctly reflected the "irrational exuberance" priced into stock values.
The market retested 4200 twice during the summer of 2000 as stocks trended higher.
The nastiest Bear in the history of NASDAQ sunk its teeth into the wallets of investors
from September of 2000 into early April of 2001 leaving many portfolios decimated.
Stocks prices were destroyed in the 4th quarter of last year, but news of layoffs, earnings
disappointments and lack of visibility did not surface until January. Downgrades were
coming in hordes from Wall Street analysts after stocks had already gotten clobbered.
The market knew the business climate was terrible long before investors heard it from
Wall Street and the financial media.
Stocks are now beginning to trend higher in the absence of corporate performance, which
is puzzling to many investors. We are experiencing the inverse of last year's bear. The
market is a forward looking mechanism, and today's prices are moving based on the
market's perception of where companies will be in six months.
Experienced money managers know the aggressive interest rate cuts from the FED will
eventually lead to an upturn in corporate performance. Excess supplies of technology from
the overfunded tech sector are being absorbed, and once we arrive at increasing
demand for decreasing inventory companies will rebound.
The market won't go straight up. There will be some pullbacks and hiccups along the way.
We have arrived at the point where pullbacks will be met with buyers, and you should now
put your sidelined capital to work. Just as analysts were behind the curve in the Bear
Market, they are behind now. Don't wait for them to come out with buy recommendations
after stocks have already appreciated 40%. The BULL is back, and the next economic
expansion could be the most prolific in history.
The OTCjournal.com
