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With tech stocks limping, the dow underwater for the year and most everyone's tea leaves pointing to a slower economy, you may find yourself thinking the unthinkable: Time to buy bonds. Ugh. You wouldn't be nuts. Fixed income is a great place to hide in a slowdown, especially one that spills into recession. The last time that happened was 1990, which is also the last time that both bonds and cash outperformed stocks for a calendar year...
...brings us to Al Gore. If corporate earnings are indeed as flat this quarter as indicator Intel is indicating, the markets could be in for a nervous October. Uncertainty - over earnings, over oil prices, over the dollar, over Greenspan's landing and over the election itself - could keep the Dow in the dumps till November. And the Dow, as the New York Times was good enough to point out Friday, is 22-3 as an election prognosticator this century. Dow goes up in fall, economy looks good, incumbent wins. Dow goes down in fall, people worry, new guy wins...
...Intel, see, is the bluest of the blue-chip tech stocks, considered the sector's best indicator of where the overall high-tech winds are blowing. It's a member of the Dow, NASDAQ and the S&P, which is the practical reason why Wall Street's trio of indexes all tanked on the news. But the spiritual malaise is just as contagious; Microsoft, Dell and Cisco all took overnight hits as well. Intel's announcement also comes early in a third-quarter earnings season that investors are nervous enough about already. Bad earnings news revives fears that Greenspan...
Ranson agrees that a defensive investment strategy--which would include large-cap tech and drug stocks--is best if you're planning to stay in the market. But he advises being very cautious as the recent rate hikes filter down. With the Dow down for the year, NASDAQ basically flat and the S&P up only 2.5%, Ranson says investors may get better overall returns from cash rather than stocks. His suggestion: wait until 2001 to invest more heavily, or at least until there's solid evidence that the Fed's moves have actually succeeded in cooling the economy...
...heavy lifting was done by a few. JP Morgan, a Dow component, shot up 16 points on speculation that they're due for a merger (word is the old-school suits over there will hold out for an extremely dignified deal). Intel, Cisco Systems and Oracle drove NASDAQ, basically because they're the best bets in a rather shaky tech sector, and investors like to have their portfolios nice and fat before the long weekend...