This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Market Rally Still Has Legs

Bulls and bears disagree on why markets were so rosy in 2003. And while they differ on the relative health of the market, they draw surprisingly similar conclusions about the market outlook for 2004 -- things are looking up.

Bullish participants say the rally that lifted the S&P 500 22.1% through Dec. 12 was the genuine return of a new bull market, fueled by strong economic underpinnings and a revival in earnings growth. Bears say the past year's gains represent an impressive bear-market rally sparked by one of the most overwhelming stimulus programs in economic history.

Despite the disagreement, many on both sides feel the market rally will be sustained for much of 2004, probably at a less vigorous pace, and led not by speculative tech stocks but by higher-quality companies and this year's laggards, especially energy companies. Meanwhile, many bulls and bears also feel that outside an event such as a major terrorist attack, inflation may loom as the biggest threat to the market and the economy -- but most feel it will be kept in check, for this year at least.

"This was a year of superfast growth in supercrappy companies," said Robert Smith, manager of the (PRGFX) T. Rowe Price Growth Stock fund. "For 2004, expect a more normal market in a very strong economy -- think of a return in the 8% to 10%-12% range. The risk is more likely the fear of inflation and higher interest rates than earnings."

The year 2003 was indeed a great year for all participants in the U.S. stock market, except perhaps the short-sellers. Virtually any long strategy worked. If you felt nostalgic for the halcyon days of 1999, you could have purchased the S&P 500's Internet software and services components and posted a 162.1% gain. If you wanted to ride the housing boom, homebuilders' stocks netted a 96.9% climb. A bet on staid farm-machinery and construction stocks returned 57.9%. Or if you wanted to stash your money in gold stocks, you would have been rewarded with a 70.8% return.

While the debate over the "why" behind 2003's market may seem academic, it holds important clues about the market's course for 2004 and beyond. If the bulls are right, the strong economic recovery evidenced in the latest GDP figures and the robust earnings recovery should put the market on a smooth course. If the bears are right, the stimulus policies may keep the party going for much of the 2004 election year, but spell big trouble in 2005 and beyond.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,461.32 -153.49 -0.92%
S&P 500 1,927.11 -14.17 -0.73%
NASDAQ 4,382.8470 -36.6310 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs