stock prices

My guess is that we are now closer to the end of a market downturn than the start of one. However, you need to distinguish between the two main kinds of market downturn. One is the stereotypical bear market — the kind of long-term decline that drags on for a year or more and is generally accompanied by a painful recession and a deep fall in stock prices. Our last bear market took place after the 1990s Internet boom went bust, from mid-2000 through the last quarter of 2002. In that period, the Toronto index fell from 11,300 to 5,800....

Today, many investors seem sure that the subprime situation and the problems associated with it will bring on a long-term market decline that could carry stock prices much lower. When a stock market prediction like this becomes widespread, the conclusion, the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) “irrational exuberance” speech in December 1996. Yet, nearly four years passed before the market hit its ultimate peak. Between the Greenspan speech and the 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....

My guess is that we are now closer to the end of a market downturn than the start of one. However, you need to distinguish between the two main kinds of market downturn. One is the stereotypical bear market – the kind of long-term decline that drags on for a year or more and is generally accompanied by a painful recession and a deep fall in stock prices. Our last bear market took place from mid-2000 through the last quarter of 2002, after the Internet boom of the late 1990s went bust. In that period, the Toronto index fell from 11,300 to 5,800. The other type of downturn, the so-called correction, may also be accompanied by a recession, and can also do a lot of damage to stock prices. However, a correction generally ends in less than a year, sometimes a lot less....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. When conclusions like these become widespread, the conclusion or the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) ‘irrational exuberance’ speech, in December, 1996. Yet nearly four years passed before the market hit its ultimate peak. In between the Greenspan speech and 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. I think those fears are overblown, but we may be in a situation like the one that began in 1997, in response to the start of Thailand’s economic crisis that year. At that time, investors talked about the so-called “Asian contagion”, and feared the crisis would spread to the west. Instead, we got over it and many markets went on to new highs. We may be on a similar track right now. I still take a generally optimistic view of the market, but I could be wrong. So you’ll want to take a relatively conservative stance. In aggressive stocks, my advice is to focus on issues that are attractive for existing value, such as Delphi, which is our “Stock of the month” for February....

Today many people seem sure that the subprime situation and associated problems will bring on a long-term market decline that could carry stock prices much lower. When conclusions like these become widespread, the conclusion or the timing or both are often wrong. Think back to how many people agreed with former Federal Reserve Board Chairman Alan Greenspan’s famous (or notorious) ‘irrational exuberance’ speech, in December, 1996. Yet nearly four years passed before the market hit its ultimate peak. In between the Greenspan speech and 2000 market peak, we went through a market setback in response to an economic crisis that started in Thailand in 1997....

Like any year, 2008 could turn out good or bad for investors. But everything I see leads me to believe it will be a year of rising stock prices. First, 2008 is the year of the next U.S. presidential election. As long-time readers know, I view the U.S. presidential election year cycle as the single best indicator for American stock prices. Historically, stock prices are much likelier to rise in the two years leading up to a U.S. presidential election than in the two subsequent years. Some years deviate from the historical pattern, of course. Markets do sometimes fall in presidential election years, and President Bush’s low approval ratings might suggest it could happen in 2008. However, some of the problems that have dogged the Bush administration are improving....

Like any year, 2008 could turn out good or bad for investors. Everything I see leads me to believe it will be a year of rising stock prices. But it may be a difficult year for aggressive investors who fail to apply our risk-cutting approach to investment. First, the positives. The next U.S. presidential election takes place in November 2008. As long-time readers know, I view the U.S. presidential election year cycle as the single best indicator for North American stock prices — Canada as much as the United States. Historically, stock prices are much likelier to rise in the two years leading up to a U.S. presidential election than in the two subsequent years....

Japanese stock markets remain volatile along with global markets. As well, a slowing U.S. economy would hurt Japan’s major export industries. However, overall, we think that Japan’s economy will continue to grow and push stock prices up. JAPAN EQUITY FUND $7.83 (New York symbol JEQ; CWA Rating: Aggressive) invests mostly in large capitalization stocks on the Tokyo Stock Exchange. The Japan Equity Fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Mizuho Financial, Sumitomo Corp., Nomura Holdings, Mitsubishi Corp., Canon, East Japan Railway, Komatsu Ltd., and Nippon Steel....

In July, we warned that we were in a particularly dangerous time in the market — a time you might call the ‘hey, this-is-easy’ segment of the market cycle. At times like that, it may seem you (or your broker) can do no wrong. Market declines often follow such times, and that’s exactly what happened. The Toronto Exchange index hit an all-time peak in mid-July. By its mid-August low, it was around 15% lower. Since then, of course, stock prices have rebounded. The Toronto Exchange is only around 4% below its July peak....