Second wind?THE stock market recovery that began in October 2002 is acting tired. The broad market averages have made little or no progress through the first three quarters of 2004. Terrorism is rampant, oil's around $50 a barrel, all's wrong with the world. Perhaps of most immediate moment for stocks, the upsurge in corporate earnings now looks to be subsiding sub·side intr.v. sub·sid·ed, sub·sid·ing, sub·sides 1. To sink to a lower or normal level. 2. To sink or settle down, as into a sofa. 3. To sink to the bottom, as a sediment. 4. . You could almost forget that the market ever staged a comeback. Well, it has. Over the past two years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Standard & Poor's 500 Index has risen at a 21 percent annual pace. Yet the index remains more than 25 percent below the peaks it reached in early 2000. The S&P needs to rise at a 6.2 percent annual rate to recover to 1,550 by the end of 2010. "Stocks represent a buying opportunity even if all they manage to do is recapture their old highs by decade's end," says Milton Ezrati, senior economic strategist at Lord Abbett & Co. "Equity returns of 8 percent to 10 percent look entirely feasible, maybe even too subdued sub·due tr.v. sub·dued, sub·du·ing, sub·dues 1. To conquer and subjugate; vanquish. See Synonyms at defeat. 2. To quiet or bring under control by physical force or persuasion; make tractable. 3. ." There are risks. War could widen. Some global financial crisis could strike, disrupting the expansion of international trade and emerging-markets growth. But gloomy appraisals omit o·mit tr.v. o·mit·ted, o·mit·ting, o·mits 1. To fail to include or mention; leave out: omit a word. 2. a. To pass over; neglect. b. the possibility of positive surprises. The bond market seems convinced that inflation and interest rates are going to stay low for the foreseeable future. The S&P 500 has a projected "earnings yield" Of about 5.9 percent over the next 12 months. That stacks up pretty attractively against a 4.2 percent yield on the 10-year Treasury note, and money-market yields in the 1 percent to 2 percent range. "Admittedly, the low bond yield reflects not only a benign outlook for inflation, but also an aversion a·ver·sion n. 1. A fixed, intense dislike; repugnance, as of crowds. 2. A feeling of extreme repugnance accompanied by avoidance or rejection. to risk," said Yardeni. "I agree that inflation should remain subdued. However, I believe growth could be surprisingly strong because the global economy is awash Awash (ä`wäsh), river, E Ethiopia, rising near Addis Ababa and flowing c.500 mi (800 km) to a swampy lake near the Djibouti border. The Awash Valley is important agriculturally and has hydroelectric plants. in liquidity." And what, you may ask, of $50 oil and talk that it might be headed for $100? "My feeling is that it will go back down," said David Nicholas, chief investment officer at Nicholas Co. in Milwaukee. He has bet co-workers the price will fall back as low as $20 before the end of the decade. While oil may be expensive, money is cheap with the U.S. overnight bank rate at a puny pu·ny adj. pu·ni·er, pu·ni·est 1. Of inferior size, strength, or significance; weak: a puny physique; puny excuses. 2. Chiefly Southern U.S. Sickly; ill. 1.75 percent. Just possibly, interest rates at such remarkably low levels portend por·tend tr.v. por·tend·ed, por·tend·ing, por·tends 1. To serve as an omen or a warning of; presage: black clouds that portend a storm. 2. better growth possibilities than stock-market pessimists are ready to admit. |
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