Newspaper article The Christian Science Monitor

Staying Warm in a Frosty Stock Market

Newspaper article The Christian Science Monitor

Staying Warm in a Frosty Stock Market

Article excerpt

There may be balmy breezes blowing outside your window now, but weather-watchers know the crisp winds of winter lie in wait.

For millions of folks, it's time to think about winterizing the house - caulking the windows, checking the insulation in the attic.

Investors, take notice! Harsh winds on Wall Street have already put a chill in millions of portfolios, and a growing number of forecasters see frosty times ahead for the stock market.

Even with last week's mega-rally in stocks, it may be time to winterize your investment strategy.

Despite those rallies, the Dow Jones Industrial Average is sharply off its high of 9338 points on July 17 (see chart, Page 10).

Some analysts already call the current decline the first stage of a bear market - a period when stock markets tumble more than 20 percent in value and share prices steadily erode.

The market could still surprise the pessimists, as it often does, and saddle up another run for higher ground, but for the first time in years, even some former optimists sound cautious.

Cleaning house

Stock expert Muriel Siebert, for example, recently scoured her personal portfolio and advises the same for other investors.

She scrubbed out stocks tied to financial turmoil abroad, especially in Russia, Latin America, and Asia. Ms. Siebert, who heads investment firm Muriel Siebert & Co., also put the pinch on companies with a weak outlook for earnings.

She recommends tossing out marginal mutual funds or stocks. Focus on the strong performers.

And focus on a plan.

"You need to be asking yourself, 'What's your money for, and how soon will you need it?' ." says Chuck Kadlec, managing director and chief investment strategist for investment firm J&W Seligman & Co., New York.

"You need a plan and a strategy to implement that plan. People should not be trying to wing" this market, Mr. Kadlec says.

He calls himself "cautiously optimistic" that stocks will soon rise. The Federal Reserve, he says, looks ready to cut interest rates. (See "Economic Scene," page 14). That should help the stocks.

But he's also slightly wary.

"Bull markets never die of old age," he says, they succumb to "policy mistakes."

The bulls can still be heard, of course. Abby Joseph Cohen, respected market strategist for Goldman, Sachs & Co. of New York, says the market still straddles strong fundamentals - primarily a buoyant US economy.

She sees the Dow at 9300 by January and recommends that investors use the current dip in the market to increase ownership of stocks or stock mutual funds.

Al Goldman, market strategist for A.G. Edwards & Sons, St. Louis, shares her enthusiasm and sees the Dow rising back around 9000 by January.

Ms. Cohen and Mr. Goldman have impressive track records in calling the market, but contrary views are becoming louder, more common, and more acceptable.

Dick McCabe, chief market technician for Merrill Lynch & Co. …

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