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SAN FRANCISCO -- About the only suspense heading into this week was whether the

Nasdaq Composite

could avoid suffering its worst year ever. The Comp's failure seems fitting, given that the year itself was characterized by disappointment and dashed hopes for most investors. Even if the Comp had dodged the bullet, the victory would have been, at best, a Pyrrhic one.

The Nasdaq ended 2000 down 39.3%, after declining 1.8% this week. Following the Comp's 85.6% ascent in 1999, few investors envisioned the index sustaining the worst year since its launch in 1971, much less being dramatically outshone by its less glamorous counterparts.

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For 2000, the

Dow Jones Industrial Average

fell 6.2%, its worst year since 1981. The

S&P 500

shed 10.1%, its worst annual performance since 1977. Meanwhile, the

Dow Jones Utility Average

rose 45%. As was the case throughout most of 2000, blue-chips outperformed growth this week, with the Dow up 1.4% and the S&P 1.1%.

Friday's action recapitulated the year. Expectations that the gains of the previous two days would lead to bigger advances proved fruitless once again. Stocks sulked into the long weekend on a decidedly sour note, with major averages ending at or near their worst levels of the session.

The week began with a sense of optimism, be it because of expectations for a

Federal Reserve

easing of interest rates, mounting cash in money market funds, a sense that 2000's losses created bargains -- or some combination thereof. Maybe it was just the holiday atmosphere.

The trading week began Tuesday with many of the same elements evident for much of the year. While the Nasdaq fell 0.9%, the Dow and S&P 500 gained as strength in financial, energy and pharmaceutical shares overcame weakness in retailing and big-cap techs like


(IBM) - Get Free Report



(CSCO) - Get Free Report

. Natural gas stocks were standout winners, led by


(WMB) - Get Free Report


Anadarko Petroleum

(APC) - Get Free Report


Another of the year's big trends, the unraveling of once highflying growth stocks, re-emerged after the close, when

Network Associates


warned. The stock plunged 61.5% to $4.50 on Wednesday vs. a 52-week high of $37.19.

But investors mainly dismissed the blowup on Wednesday, the week's best overall session for those long. Growth mavens focused on chip stocks and momentum favorites, including





(QCOM) - Get Free Report





Juniper Networks

(JNPR) - Get Free Report

, which helped the Comp rise 1.8%. The Dow and S&P also gained.

The advance continued Thursday, but with less oomph as the lowest reading on the

Conference Board's

consumer confidence index in two years, and Chapter 11 filings by

Montgomery Ward




, served as the latest reminders of the economy's dramatic slowing.

"As the year draws to an end, the outlook for the world economy has darkened considerably from the boomlike conditions spawned by the global healing of 1999 and early 2000," wrote Steven Roach, chief economist at

Morgan Stanley Dean Witter

on Friday. "Investors for the most part still see the outlook through rose-colored lenses ... but the risks remain decidedly on the downside of this optimistic scenario, and we would continue to place a 40% probability on a hard landing in 2001."

As expectations the Fed would ease prior to its Jan. 30-31 meeting diminished, so, too, did the rally attempt.

Where Do We Go From Here?

"It looks to me like a classic bottom, but there is no confirmation of that," said John Bollinger, founder of

in Manhattan Beach, Calif. "All the ingredients are there, but more confirmation

is necessary. You need a sign of strength but haven't had it yet."

The odds that major averages saw their final lows of the cycle on Dec. 20 (save the Dow, which bottomed Oct. 18) are "very high," Bollinger said. But he's "hesitant to make that assertion," reflecting the challenges presented lately to even the savviest market watchers.


last night's Report Card, Bollinger predicted continued outperformance by mid-cap stocks, among the leaders in 2000. The

S&P MidCap 400

rose 16.2% this year. He cited "election uncertainty" as the primary cause for both the S&P and Comp falling farther in the second half than he'd previously expected.

"I didn't see it coming

but when we get that kind of profound uncertainty, portfolio managers freeze, rather than making decisions," he said.

But because of the rising cash holdings at mutual funds that resulted -- 6.5% in November, according to the

Investment Company Institute

-- and expectations for a more accommodative monetary policy, "you're in a position now where the risk/reward

for stocks is very favorable," Bollinger said. "The risk of a bear market for the broad list of stocks is very small."

Still, he does not believe the market is going to come roaring back in 2001.

Arthur Bonnel, manager of the


U.S. Global Investors Growth fund, offered a similarly cautiously optimistic view.

He hasn't given up on tech -- although his $185 million fund's exposure is down to 20% from more than 50% earlier in the year -- and he forecasts the group might bounce in January because of seasonal factors, including the funding of 401(k)s and IRAs. But Bonnel won't be sure the group is the place to be again until the bad news stops, or more stocks demonstrate the ability to withstand preannouncements and downgrades.

There's been evidence of such resistance lately -- this week by IBM,


(DELL) - Get Free Report

and retailer


(WMT) - Get Free Report

-- "but I don't believe it just yet," the fund manager said. "We have to wait and see how they act next month."

Rather than trying to forecast the future, Bonnel prefers to invest "with a rearview mirror." Practically, that means investing in stocks that are rising, rather than bottom-fishing.


(XRX) - Get Free Report



(among many others) demonstrate the perils of "trying to catch a bottom," he said.

Midweek gains by growth favorites reflected, in part, investors' continued optimism. That's despite an unsuccessful search for a sustainable bottom since major averages peaked in the first quarter. Most growth favorites ended the year far below their 52-week highs, but that has seemingly done little to stop the bottom-pickers from harvesting hope.

As a result, a further ratcheting down of expectations is probably still necessary before stocks return to the heady performances posted in the '90s.

And finally

A healthy, happy, safe and successful New Year to all.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.