Market Veterans Weigh In On Fears Haunting Stocks
THE WALL STREET JOURNAL
Are stocks bottoming out or caving in?
After another brutal round of selling last week, optimists weren't easy to find on Wall Street. On Friday,
the Dow Jones Industrial Average fell 3.7%, or 295.67 points, to 7701.45. The index slipped 3.6% for the
week, while the tech-heavy Nasdaq Composite Index was off 1.8%.
Investors fretted about many of the issues that have troubled the market for weeks. Earnings warnings
from Philip Morris and Wyeth sent those stocks lower, while
corporate-governance concerns -- including
talk of a Citigroup settlement with regulators over stock-research activities -- also hurt stocks. Philip
Morris was "one of the areas investors were hiding," says Jeffrey Tabak, managing director at brokerage
firm Miller Tabak, because investors think demand for cigarettes should be steady in good times and bad.
International instability came into play Friday, as woes in Brazil and Argentina hurt the shares of large
American financial institutions such as Citigroup and J.P. Morgan Chase, which lend to the region.
Yet, the view that the market is in for an inexorable fall isn't universal. A large stable of bullish analysts
point out that earnings, despite high-profile warnings, are improving and that the economy is doing better
after a swoon during the summer.
, a strategist at Morgan Stanley, turned optimistic this summer, after predicting at the
beginning of the year that the stock market would finish lower for the third straight year. Mr. Wien, a
well-known market hand who was criticized for his warnings in the late 1990s that the market was
dangerously overvalued, now says the bear market is over.
Mr. Wien says the stock market is dramatically undervalued, given low interest rates. He says investor
sentiment is too negative amid improving earnings and what appears to be a healthy economy. He says the
S&P 500 will finish the year down only 10% to 15% -- which, given it is off 26% now, would be a feat --
and that the market will rise 10% next year.
Then there is
, head of U.S. equities at Julius Baer Investment Management in New
York, which has about $3.9 billion in assets under management. An unapologetic bear, he says earnings
are still overstated and that investors can't trust the numbers being pumped out by American companies.
and 650 points during the next several years.
Last week, The Wall Street Journal sat down with the analysts in separate interviews and asked each to
make his case.
Reformed Pessimist Thinks Bottoming Process Started