Outlook: Don't expect calamity on Wall Street

THERE COMES a point at which numbers lose their meaning. The Dow reaches 10,000 - so why not 11,000? This was certainly the reaction of one prominent Wall Street bear yesterday, Ed Yardeni of Deutsche Bank. To be scrupulously fair to Dr Ed, as he styles himself on his website, his bearishness concerns the future rather than the present, and the huge recession he reckons will result from the year 2000 computer problem. But, as even he admits: "There are more people considering leaving their jobs so they can trade stocks on their home computer than survivalists preparing for the Y2K calamity."

This survivalist admission neatly encapsulates the dilemma for anybody feeling slightly woolly about prospects for share prices right now. The alternative options are both so extreme. On the one hand there is the karmic view taken by true believers in the Internet hype - that in the new economy whatever people believe to be true about valuations is true.

On the other is the catastrophist theory that Wall Street is a bubble inflated far beyond anything that could be justified by fundamentals, such as expected profits. It might take the merest prick - in the form of bad news on profits, or the trade deficit or interest rates, never mind a computer bug-related slump - to burst the bubble and send shares tumbling by 50 per cent or more.

The trouble with this second theory, plausible though it might seem, is that as long as there is so much cheap money sloshing around it is almost bound to be proven alarmist nonsense. Which other economies look worth buying? What other assets offer significantly better yield? Hi-tech stocks have reached silly valuations, but where else is business as strong, and with such a robust technological lead, as in corporate America?

For all these reasons, it is still hard to see what could send Wall Street tumbling in the short-term. There is certainly excess froth in Internet stocks, and the rise in shares is not as broadly based as it might be for comfort. Yet there is also a recognition on Wall Street of the genuine achievements of Main Street, Silicon Valley and - not least - the marble pillared splendour of the Federal Reserve Board in Washington DC.

The right position to adopt on stock markets, both in the US and Europe, is not to expect too much. On the other hand, calamity seems as improbable as a continuation of the spectacular gains of the last 10 years.