Sunday, November 20, 2005

Ladies and Gentlemen Start Your Engines

Ladies and Gentlemen Start Your Engines

Close your eyes and take a deep breath. Visualize this, two years of a range bound market with little to no volatility and meager profits for most. Okay, now open your eyes: Asian, South American and European indices all rose this year, some in excess of 25%. Global growth is not just good, its great, the best its ever been; and its getting better.

The nasdaq and S&P, representations of American ingenuity and financial strength, led stock markets out of the internet bust in 2003 and 2004. This year foreign markets performed well as US markets continued, in a technical sense, to wait for them to catch up. Countries like Japan, whose growth decelerated for 10 years or more now show real promise of reflating as "rock n roll" Koizumi leads reforms. Middle Eastern Countries, flush with billions in oil profits need planes, trains and automobiles. South Americans, whose mineral rich nations have supplied the building blocks of the world, need capital equipment, media and modernization. And America, with the most imaginative and least restrictive entrepreneurial society in the world continues to lead all markets in the scope of its growth and its ability to service these growing markets.

On Friday the S&P500 closed at a multi-year high, breaking through the resistance of its two year narrow range. What is interesting is that the index broke a short chain of lower highs setting up the next stage for the stock market. Sure, the smart money could go cold here, but we believe that fundamental and technical indicators signal longer term growth. It will not likely be a move that raises all ships though, as old leaders fall and new ones will rise, and believers compete with non-believers. It will be important to be in the right stocks at the right time as we expect the market to get more volatile going forward and new asset classes take control. The consensus calls for the S&P500 to be between 1250 and 1300 by year end; for sure others expect a flat to lower market. Perhaps the contrarian view should not be slightly lower, but much higher, like 1350-1400. Only time will tell but a rise of that magnitude is not out of the question as other economies compete for leadership and their share of the prize money.



Great suggestions

9:36 AM  

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