Jewish World Review June 17, 2003 / 17 Sivan, 5763

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Bullish on America


http://www.jewishworldreview.com | This time it's different. The Wilshire 5000 Total Market Index has advanced an incredible 25 percent and has gained $2.2 trillion in market value since its March low. Yet there are investors who still don't believe we're in a bull market.

Their hesitation is understandable. After all, we have been here before.

First, after the July low of last year, and then again after October's low, strategists were too eager to declare that "this time" the market had found the bottom - only to see the market dip back down again in March of this year. I've been optimistic about the improving economy, and positive about the market since October.

And while many aren't sure if it is safe to call the current market a bull, there is ample reason to believe we're now in for a sustained market advance, with reasonable levels of appreciation in stock prices. That doesn't mean there won't be downturns. It doesn't mean a straight line to the promised land.

Despite Friday's University of Michigan report that showed a moderate downturn in consumer confidence last month, there's renewed investor confidence, more money moving back into the market, signs of improving business sentiment, and relief over a short and successful conflict in Iraq. That's put the market in a much better position than after its previous lows. And the fact that many areas of the economy couldn't have fallen any further may signify that the market has seen a major bottom and has turned around.

"A lot of things just can't get any worse, and a lot of things are already getting better," says Alexander Paris, president of Barrington Research.

Paris points to business spending and inventories as two things that have already hit rock bottom. Businesses had withheld spending for so long that equipment now needs to be replaced. And manufacturers have kept inventories so low that they now need to ramp up production. "If you can't knock inventories much lower then it's no longer a negative factor; it's a potential positive factor," Paris says.

Kevin Caron, a market strategist at Ryan Beck & Co., says, "The set of conditions that we're seeing on this attempt to get through 9000 is fundamentally different than the last two attempts to get through 9000."

According to Caron, one of the reasons for the difference is the new stimulus that is on the way, "Whether you are a Republican or a Democrat, agree with the tax plan or don't agree with the tax plan, the fact of the matter is that there is fiscal stimulus coming," he says.

Other positives helping to lay the foundation for economic growth are low interest rates that may drop even further, low inflation and lower energy costs. In addition, the Fed has been increasing money supply, making it easier to borrow.

And the most important positive factor fueling this market is that many investors now seem willing to look towards the future. As Caron says, "Now, as the investor looks out over the time horizon, they're not thinking out one or two or three months. They're now starting to think out one, two or three years."

Caron also points out that, "Investors are seeking value in the stock market by extending their time horizon and seeing opportunity."

Paris agrees. "The sentiment has changed," he says, "and so now investors are more willing to look over the valley. They're saying, 'I know things aren't that great, but I think things are going to be much better in the second half, and I'm willing to bet on it.'"

So are an ever-increasing number of investors and money managers. But it's still a bet and not a certainty.

But that's what makes markets, and this one is starting to look a lot like a bull market.

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