DON'T be fooled by the stalled indices or talk that the Federal Reserve is finished cutting interest rates. Stocks are headed higher, according to some of the most influential investors around.

These tentative bulls say it's irrelevant that profits and economic growth appear to be slowing or that much of the world is in recession. As long as individual investors continue to pour money into the US market, share prices are going up. "The public's back in the game," said Steven Leuthold of the Leuthold Group "We think the market will reach new highs." That's a startling prediction from someone who's made the case since 1994 that stocks are dangerously expensive. Mr Leuthold says stocks are still too dear, but it doesn't matter. "The public doesn't care about valuations. The public only knows that the market is the best place for their money."

The S&P 500 has surged 17 per cent since 8 October and the Nasdaq is up 30 per cent. "People have been schooled on buying on the dips," said Peter Havens, manager at Bryn Mawr Trust. "We keep wondering when that will stop."

No matter what the Fed decides at its interest rate meeting this week, Treasury bonds are also likely to gain. Many investors expect the Fed to reduce rates on Thursday for a third time in seven weeks. Yet even if it doesn't, slowing growth, tame inflation, and the prospect of less Treasury borrowing will probably help bonds gain in the months ahead.

"There's going to be slow growth and low global inflation," two pluses for bonds, said Martin Jones at First American Asset Management. "The Fed isn't likely to change that trend." He sees the 30-year bond yield falling to 41/2 per cent within six months from 51/4 per cent now.

For the week, stocks retreated. The S&P 500 fell 1.3 per cent, the Nasdaq 0.5 per cent and the Dow 0.6 per cent on concern that the US may lead an attack on Iraq and that the Fed may not cut rates this week.

Yet many investors now say a war is unlikely to have much effect on the US economy. And they make the case that the bull market can weather inaction by the Fed. The bigger concern is that stocks are still expensive. While Mr Leuthold predicts the Dow will surpass 10,000 next year, he calls the US market "radically overvalued". "When the public love for stocks grows cold, as it always does, it's going to be a long way down."

Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'