Fed Action, Contrarian Indicators Signal Investor Opportunities

GuruVision: The Opportunity Is Nigh

SAN FRANCISCO -- Instead of biding their time, chewing their nails and nervously waiting for the Federal Reserve Open Market Committee's meeting tomorrow, as many expected, investors chose to buy stocks today in anticipation of the Fed's presumptive ease. The Dow Jones Industrial Average rose 1.4%, the S&P 500 climbed 1.8% and the Nasdaq Composite gained 3.2%.

Thomas McManus, equity portfolio strategist at Banc of America Securities, also didn't wait for the Fed to take action. Today, he raised his recommended equity exposure to 65% from 60% and reduced bonds to 30% from 35%, leaving cash at 5%. McManus left his 12-month price target for the S&P 500 unchanged at 1475, as well as earnings-per-share estimates for the S&P 500 at $54 for 2001 and $62 for 2002.

"While our [earnings] forecasts remain lower than consensus expectations, we believe stocks are finally beginning to wake up to the magnitude of the earnings degradation we envision," McManus wrote. ...