Wednesday, January 2, 2008

Stock Bulls' Five Cheers

From the Wall Street Journal:

The market's optimists are increasingly treated like wallflowers at a high-school dance. Upbeat views are scoffed at as out of touch with reality. "Haven't you seen the latest housing numbers?" the skeptics howl. Pessimism has become so prevalent that investors may have a hard time remembering that stocks posted a respectable advance in 2007.

If the stark scenario of a recession were to unfold, stocks likely would extend their fourth-quarter declines, which were capped by Monday's 101.05-point loss in the Dow Jones Industrial Average in the year-end session.

Of course, the resiliency of stocks (the Dow did rise 6.4% for the year) also could mean investors don't think the worst-case scenarios are a sure bet. At least, that is what the optimists think.

Here is a rundown of five events those last bulls standing say could surprise the bears this year:

1. Stocks rally.

The fact that stocks fell for the fourth quarter -- the first time that has happened in 10 years -- raises questions about whether they have further to fall. Indeed, few catalysts for a rebound are apparent. The Federal Reserve's rate cuts gave stocks a boost for a while, but it looks increasingly likely that even lower rates might not help stocks rebound....MORE