Bears on the rampage
NEW YORK MARKET
Sunday 06 September 1998
"We've gone down harder than I would have anticipated in the initial stages of a bear market," said Robert Rodriguez of First Pacific Advisors in Los Angeles. "It almost doesn't matter what you own."
The Standard & Poor's 500 index has fallen 18 per cent since reaching a high on 17 July, and has dropped in six of the past seven weeks. Financial companies were damaged the most, with Travelers Group, a member of the Dow Jones Industrial Average, tumbling 46 per cent, and Citicorp, the second-largest US bank, losing 49 per cent.
Cisco Systems, Microsoft and Wal-Mart Stores, among this year's best performers, are the "next to go", said Martin Sass, the president of MD Sass Investor Services. Still, their price-to-earnings multiples are "way up there in nosebleed territory" given that earnings growth is slowing, he said.
Optimists say the worst may be over. Interest rates are low and the economy is growing. Typically, the opposite is true before stocks enter a bear market.
Thomas Galvin, of Donaldson, Lufkin & Jenrette Securities, reiterated his forecast of a 40 per cent rally in the market over the next 12 to 18 months. That would take the Dow Jones industrials well beyond 10,500.
Investors drove the Dow Jones average down 411 points, or 5 per cent, last week. Sentiment is so skittish that stocks may fall another 10 to 15 per cent, even though the S&P 500 is fairly valued given the outlook for earnings and interest rates, Sass said. A decline of that size would leave the Dow industrials at about 6,870.
Some investors are buying corporate bonds - hoping to reap big gains - after the market's month-long rout. The gap in yield between corporate bonds and Treasury securities ballooned to its widest in over seven years last week.
For those who don't expect the economy to tumble into recession in the near future, bonds of companies such as IBM and Fannie Mae are hard to resist.
"As long as people have jobs and keep spending money, everything will be okay," said John Kornitzer, of Buffalo High Yield Fund. "It's a matter of weathering the storm because it'll look great on the other side."
- 1 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 2 Dog thinks owner is drowning in lake, dives in and tries to pull him out
- 3 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 4 Chilling drone footage captures Auschwitz ahead of 70th anniversary of liberation
- 5 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Greece elections: Greek PM Alexis Tsipras takes aim at 'neo-liberal' Europe as country gears up for prolonged austerity battle
Auschwitz liberation 70th anniversary: Woman sent to three Nazi death camps describes surviving gas chamber
Pornhub star Mia Khalifa receives death threats after being ranked the site's top adult actress
Prince Philip set to be knighted by Australia: Celebrate by reading his greatest gaffes
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
Leaked documents show Ukip leaders approve NHS privatisation once it becomes more 'acceptable to the electorate'
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...