New York Market: Bears lurk as the money pours in

Money poured into US stocks in the first week of 1999, even as analysts warned that stocks may be rising too fast and that a revival of inflation later this year could drive up interest rates, threatening a bull market now into its ninth year.

The Dow Jones Industrial Average closed above 9,600 for the first time, approaching the year-end targets of some of Wall Street's top strategists, as money streamed into retirement accounts and mutual funds. For the week, the average rose 5 per cent. "The amount of pessimism in the market has largely disappeared," said Timothy Ghriskey, manager at Dreyfus Corp. "People are more scared of being left behind, so the money gets thrown into the market."

Even strategists who raised some concerns weren't bearish on the overall market. Goldman Sachs' Abby Joseph Cohen, one of Wall Street's most bullish strategists, said last week that stocks may have risen too fast, and advised clients to trim their shareholdings. Yet she also said the current calm state of interest rates should let the economy grow, giving stocks room to rise.

Byron Wien, Morgan Stanley Dean Witter's director of investment strategy, said the economy's strength could revive inflation in six months, forcing borrowing costs higher - bad news for profits and shares. Still, he said the market "has a long way to go before it gets into real trouble".

So far, investors aren't too concerned. "What is driving this market is a firehose of liquidity," said James Griffin, market strategist at Aeltus Investment Management. Monetary policies aimed at fixing Russia's and Asia's financial woes are spurring "a huge ocean of money for the market, and the potential for that money to keep coming is very strong". In the first five days of 1999, the Dow average rose to a record 9,643.32. The S&P 500 closed at a record 1,275.09, up 3.7 per cent. The Nasdaq soared 6.9 per cent to a record 2,344.41.

Investors are paying less attention to companies' valuations than they should, Mr Ghriskey said, and "that is a long-term concern for the stock market. Eventually, investors have to focus on earnings."

Barton Biggs, strategist at Morgan Stanley, said: "Valuations are just ridiculous, and as the year progresses, earnings are going to disappoint. We're going to have a normal cyclical bear market, which we're overdue for."

Investors' optimism will get a reality test in coming weeks as companies report fourth-quarter earnings. Banks are due to report this week.

Dow Jones Copyright: IOS & Bloomberg

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?