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Mix-Ansicht- The very long-term outlook is still risky - leibovitz, 12.12.2001, 16:04
The very long-term outlook is still risky
VERY LONG-TERM SENTIMENT CONSISTENT WITH"W"
Just released Federal Reserve Flow of Fund statistics show two key, very long-term sentiment indicators -- stocks as a percentage of financial assets of households (S485 -below left) and institutions (S484 - below right) have both improved dramatically from their all-time record peaks in the first quarter of 2000. However, at 33.3% and 36.4% stock holdings, they are still well above 45-year means of 25.2% and 25.7%, respectively. What this tells me is that the speculative excesses so evident at"The Bubble of 2000" peaks have still not been fully corrected, and a"reversion to the mean" almost certainly would cause another leg down in the stock market (a"double dip" or"W" formation).
Now as NDR's Tim Hayes has pointed out, 2000 may have been a secular peak, but that does not mean we could not have a cyclical bull market. Note on chart S485 the secular peak in 1968 and the secular low in 1982, but in between we had several bull markets including the 1970-1972 cyclical bull market. But still S485 and S484 argue that risks remain for the secular outlook.
Turning to the short-term sentiment outlook, the NDR Crowd Sentiment Poll peaked at 65.3% bulls (well into the high-risk region) on December 6, 2001 and it has since fallen to 63.0% bulls. That is a slightly negative reading. Below 55.5% one can start looking for a short-term bottom. Our NDR Wall Street Strategists Poll likewise has fallen from 64.2% bulls last week to 61.6% now.
In conclusion, short-term sentiment and seasonals have called for some tax-loss weakness after the first five trading days in December during the next eight sessions, but then we should see strength return. The very long-term outlook is still risky. www.ndr.com
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