These bulls argue that market-friendly trends of late will not abate. Interest rates may continue falling, investors will continue pouring money into mutual funds, and the "Year 2000 problem" will buoy technology spending - all occurring as Asian economies recover.
"By the end of next year, the Asian crisis will be two-and-a-half years old," said Tom Galvin, chief investment officer at Donaldson, Lufkin & Jenrette. "People will begin to see global economic growth rebounding, which will be good for corporate profits and good for stocks."
True enough, the pessimists had a strong case in the past week. The Dow Jones Index fell 2.2 per cent last week as blue-chip companies such as Merck, Procter & Gamble and Coca-Cola warned that profits would fall short of expectations.
These declines fanned concern that an ever-shrinking clique of huge companies is powering the market. While the S&P 500 is up 20 per cent this year, the average stock in the index is 21 per cent off its high.
"Many of the strong stocks that have camouflaged this bull market have started to weaken," said Robert Freedman, chief investment officer at John Hancock Funds. "That's troubling. The market needs to have a continuing broad advance, but the market is narrowing."
Some managers argue that technology bellwethers will benefit as companies invest to address the problem of the millennium bug. The internet is helping large companies to save billions of dollars and increasing competition among suppliers by ordering parts and materials over the computer network.
In the bond market, older Treasury bonds are paying big premiums compared with the benchmark, handing traders an opportunity and the Federal Reserve a reason to consider cutting interest rates.
The bond sold a year ago, which matures in November 2027, yields 5.25 per cent, while the benchmark bond, which matures in November 2028, yields 5.02 per cent, leaving a difference in yield of 23 basis points. That gap is "awfully big," compared with the historical norm of about 7 basis points, according to Martin Jones at First American Asset Management.