John Augustine Quotes
It seems the storm is not going to be as strong as we feared and that was enough to take some of the selling pressure off stocks today. We are not likely to see real stock-buying this afternoon as most investors still want to see what happens with the storm during the weekend, but if damage is minimal, we might be bound for a rally on Monday.
Big institutions are holding back their own capital. They're looking for an upside catalyst for stock prices. Any activity on the mergers and acquisition, buy-back or dividend fronts, mixed with good news out of energy or the Fed, would be a catalyst to bring the big institutions back into stock market.
Technically, we already saw this in 2005, since the SP 500 up 4.91 slightly beat the Russell 2000 up 4.55. But now in 2006, we are seeing a migration to large caps and mega caps. Some of this rotation is due to an expected slowdown in overall corporate profits. During such an environment, investors are more comfortable with large-cap companies, which are stable and more consistent in performance.
If the economy is as strong as the Fed is worried about, that's going to mean better corporate earnings. The driver is rotating from front-end consumer to back-end business spending. And business spending is being driven by the need to continually improve productivity, which brings in tech spending.