optimistisch. Tenor: 6 Monate flat zum Jahresende Erholung um ca 10%. Wer jetzt investiert liegt nicht ganz falsch...
Mal sehen, wie es weitergeht.
Rate Cut Plus Patience Equals Reward
By Chelsea Emery
NEW YORK (Reuters) - Patience is a virtue.
That's what portfolio manager John Forelli of Independence Investment
LLC is telling clients after today's interest-rate cut failed to ignite a rally.
Gains will come, just not right now.
``The market's not going to soar over the next three to four months because we don't have the earnings
growth or the earnings strength yet, and the rate cut is already factored into stocks,'' said Forelli, who
helps manage $4 billion. ``But you can still buy now and be rewarded.''
Forelli is one of many money managers saying investors are unlikely to see strong gains until later in the
year. The reasons: It can take as much as 12 months for a rate cut to boost the economy; analysts
expect corporate profits to decline through the third quarter; rising unemployment could cause
consumer spending to fall, and there's lingering suspicion the economy is in worse shape than many
think.
``The Fed wouldn't be this aggressive without a reason,'' said Ken Sheinberg, head of listed trading at
SG Cowen. ``We really need a string of positive news to get us higher.''
Good things come to those who wait, though.
``We're very bullish,'' said Charles Blood, director of financial markets strategy at Brown Brothers
Harriman & Co. in New York. ``It's typical for news to be bad right now because of the timing of the
economic cycle we're in. Bad news now doesn't dissuade me. It just shows me it's part of the normal
progression.''
Forelli, who expects the market to shake off its malaise by autumn, has been adding shares of retailers
like Lowe's Cos. Inc. (NYSE:LOW - news) in anticipation they'll gain the most as consumer spending
picks up.
FED CUT FAILS TO IMPRESS STOCK INVESTORS
The U.S. Federal Reserve (news - web sites) cut short-term interest rates by a half-percentage point
for the fifth time this year to jump-start the U.S. economy. Stock investors were unimpressed, though.
The Dow Jones industrial average (^DJI - news) stood nearly unchanged, down 1.44 points, or 0.01
percent, at 10,875.89 immediately after the announcement, while the technology-dominated Nasdaq
composite index (^IXIC - news) rose 15.10 points, or 0.74 percent, to 2,097.89. The broad
Standard & Poor's 500 Index (^SPX - news) ticked up a mere 1.35 points, or 0.10 percent, to
1,250.27.
Why didn't stocks gain more after such a move? After all, lower interest rates make borrowing
cheaper, prompting spending by businesses and individuals alike.
For one, most economists say it takes at least nine months for a Fed policy change to filter through the
economy, though they say stocks anticipate the impact a few months earlier.
Also, investors had already factored in the Fed's move and sent the market climbing for four straight
weeks before a slight decline last week.
Falling earnings also weigh on stocks. Profits for companies in the Standard & Poor's 500 index
(.SPX) are expected to drop 3.1 percent this year, even after the Fed has slashed rates by 2-1/2
percentage points so far this year, according to Thomson Financial/First Call.
As if last quarter's announcements of declining corporate profits weren't enough, the market will soon
face another ''ugly'' confession period when companies tell investors they are likely to miss earnings or
sales estimates, said Stanley Nabi, managing director of Credit Suisse Asset Management.
In addition, unemployment has risen, which means consumers will likely spend less, hurting companies'
bottom lines. Unemployment in March rose to 4.5 percent, the highest level since October 1998.
And in a counter-intuitive twist, data showing strength in consumer sentiment and retail spending last
Friday threw doubt over whether the Fed will keep ratcheting down rates this year. The Fed's next
policy-setting meeting is set for June 26-27.
MARKET TO PERK UP NEAR (news - web sites) YEAR'S END
All these factors spell bad news for the market short term, but things will look better by the end of the
year, as companies and individuals begin to feel the benefits of rate cuts, investment professionals say.
``If you look at a lot of companies' earnings outlook, the earnings are negative, but there's tremendous
turnaround potential,'' said Tim Woolston, portfolio manager at Boston Advisors Inc., which oversees
$1.5 billion. ``2002 will be an earnings recovery year.''
Optimists also suggest excess cash created by lower interest rates will soon start flowing into stocks.
``When you have money supply growing faster and the economy growing slower, money sloshes
around looking for a home and it ends up in the financial markets,'' said Blood.
And while unemployment is rising, it's still lower than historical norms. That suggests consumer
spending will help prop up the economy even as capital goods spending continues to lag.
``Investors shouldn't expect good earnings news or good posturing by companies for at least six
months,'' said Forelli. ''But buy today and you'll be rewarded later. I expect a 10 percent gain in the
market this year.''
Within 45 minutes after the Fed's rate-cut announcement, the Dow average was up 42 points, or 0.39
percent, at 10,919, while the Nasdaq composite index was up 40 points, or 1.94 percent, at 2,122,
and the S&P 500 index was up 8 points, or 0.68 percent, at 1,257.
Gruß Dr. Broemme
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