Meet the Street: Not Out of the Woods Yet

While mutual fund investors are probably not yet euphoric about equities, having poured $73.5 billion into money markets and $12.5 billion into bond funds in October, according to the latest numbers from Lipper, the recent run-up in the equities markets since Sept. 24 has created some excitement.

Andrew Clark, Research Analyst, Lipper

Recent Meet the Streets

FuelCell Energy's, Jerry Leitman

Lipper's, Jeff Tjornehoj

Deutsche Bank Alex. Brown's, Douglas D. Mitchelson

Columbia University's, Bruce Greenwald

But Andrew Clark, a research analyst with Lipper, says now is still not the time to put all of your chips into the market, and particularly into the tech sector, which has largely led the latest rally. Too many signs show that the economy has not recovered yet, and technology stocks tend not to be the ones that rebound first. As for those investors who are betting the ranch on bonds, Clark also warns against the potential for inflation to creep in.

TSC: Has the economy turned?

Clark: The short answer to this is no. Industrial production, which is normally viewed as a coincident indicator (i.e., it moves in the same direction and the same time as the economy), is still down in the dumps. Initial unemployment claims are a leading indicator , and they have been improving for the last three weeks, an interesting sign. The unemployment rate is a lagging indicator, and that's just getting worse and probably will continue to do so in the near term. Stocks and stock funds, also a leading indicator, normally by about six to nine months, are also up. So a recovery yet? No. Signs of it coming? Yes.

TSC: What will happen if the recovery doesn't come as quickly as people would hope?

Clark: The market will retrace, possibly down to the Sept. 21 lows or even lower. This would be [the] kind of damage to the market's psychology that the stimulus package would have a hard time countering. ...