Forecasts Aside, Markets Happily Fix on Short Term
IN THIS TIME OF SEASONAL CELEBRATION and cerebration on the year to come, Wall Street seems more inclined toward carpe diem than caveat emptor.
With their typical focus on the short term made more acute by the calendar and the indexes treading near three-year highs, many professional investors are too consumed with making the most of the next three weeks to pay much attention to the 2005 outlook.
In the short term, the bias toward buying each dip has led to unusually upbeat investor sentiment and an attendant lack of caution. That doesn't spell doom for the impressively broad advance that began in late October, which has won the bulls the benefit of the doubt, yet it suggests a general unwillingness to look at the bigger picture. The current game is too fun to worry about next season's schedule, apparently.
But that won't stop the tidily packaged year-ahead forecasts from piling up in investors' e-mail boxes, or in ours here at Barron's.
It's easy, and often profitable, to deride the very exercise of predicting market behavior and to bet against the prevailing mood on principle. But let it be said that the rough consensus for stocks in 2004, as detailed in this column, was for the S&P 500 to finish this year between 1125 and 1250. As it now stands, with the index hovering just under 1190, that appears to have been a pretty good collective call.
The current market tone is rather like it was last year at this time, and the year before, for that matter. A late-year rally is under way, and there's a general anticipation among the appointed market handicappers of more upside to come in the approaching year.
Though it may not have felt very placid or particularly generous, the market in 2004 essentially traversed a narrow trading range, with a modest upside tilt. Stocks' gifts were bestowed in sudden spurts, though, and it was quite easy for ill-positioned investors to miss the moves.
A look below the headlines of last year's consensus predictions restores some of the contrarian's faith in spurning the predominant tack.
The tenets of the typical Wall Street forecast a year ago went like this: Stock gains will easily outpace bond returns. A rotation should occur from small stocks to large, stable securities -- the so-called quality trade. The sectors to emphasize were said to be health care, consumer staples and basic materials stocks.
Not exactly. Yes, stocks did outperform bonds, but hardly decisively. With the S&P's total return close to 8% in 2004, the 10-year Treasury delivered more than 5% returns. The Dow Jones corporate-bond index added better than 6%.
And in retrospect, little stocks were the place to stay, as the small-cap indexes surged to new highs and tripled the return of large shares. Health care was a disaster in general, though that was largely due to wretched results in drug stocks, which were not (and still are not) particularly loved. Materials slightly outpaced the broad S&P 500 return.
If nothing else, then, it pays to take measure of the consensus calls, just to know where the crowds are, and thus where the majority might be vulnerable to surprise.
With that in mind, here are the broadly held beliefs about 2005.
Once again, Wall Street is looking for stocks to do better than bonds. Indeed, one of the predominant sources of caution about stocks is the near-universal belief that Treasury yields will certainly be rising. (See Cover Story.)
The confidence in the none-too-surprising bullish stock call bespeaks a faith in good corporate-earnings growth, cash-rich companies and supposedly underinvested retail investors. Rates will rise, the story goes -- but not so much that they'll dent stock prices. Oil prices have seen their highs and -- year over year -- the consensus hopefully expects the drag of energy costs to recede.
The Federal Reserve remains in tightening mode -- but that's good because it indicates economic strength. The dollar, after a bounce, will probably continue sliding -- but that's said to be a net positive because it aids multinational earnings. Inflation may tick higher -- but don't worry about it reaching worrisome levels.
One core risk of this generally soothing view is the course of corporate earnings.
Because earnings growth has been expected by nearly everyone to slow next year, the bulls assume the deceleration is already discounted in the market. Maybe, but tell that to the analysts, who are penciling in 10% bottom-up profit growth and a nearly unprecedented fourth year of rising profit margins from near-peak levels.
According to Morgan Stanley strategist Henry McVey, current analyst forecasts imply that 78% of S&P 500 members will achieve higher profit margins in 2005 over this year.
A tall task, and if nothing else these expectations should raise the risk of stock-specific blowups. It's also not too far-fetched to conjure one earnings-warning season precipitating a crisis of faith in this area, perhaps leading to the kind of truly scary correction that 2004 lacked.
What's more, a return to the historical trend in which analysts habitually overestimate next-year earnings would drop earnings growth into the mid-single digits. Two-thirds of all 24 S&P 500 industry groups are projected to post double-digit profit increases, amid a slowing economic expansion and supposedly quiescent inflation. Therein lay more room for unpleasant surprises.
The cash-flush state of big companies is undeniable. What's less apparent is whether this liquidity will end up being deployed to the advantage of shareholders. A major rush of share buybacks and higher dividend payout rates (see General Electric's $15 billion repurchase announcement and 10% dividend hike Friday) would generally be welcome, in the absence of enticing reinvestment options.
Last week, too, saw some merger-spurred excitement in the market, with talk of Johnson & Johnson-Guidant and Sprint-Nextel hookups getting the adrenaline pumping. Merger binges can deliver that quick hormone high but can just as easily destroy corporate value.
The maverick's bet? That companies will continue marshaling cash and averting risk, thereby operating by the bondholders' preferred tack and delivering another good year for corporate debt.
Though the general mood is upbeat, it should be noted that the relative sobriety of the brokerage-house strategists -- with most looking for single-digit market returns -- doesn't speak to rabid bullishness. Individual investors and newsletter writers are showing some excessive giddiness in recent surveys. But some worrisome trends -- oil and the dollar -- are getting enough ink that it's hard to call the current mood overly exuberant.
The "1995 scenario" is at least possible, when a tough, range-bound year in 1994 gave way to a march of corporate productivity gains, mergers, inflows of investor cash and 30%-plus stock gains. That, too, would rank as a consensus-confounding surprise.
But let's not forget the Fed began trimming rates in '95, earnings surged 20% and the year hadn't followed one of the great bubbles and brutal bear markets in a generation.
As for sector calls, current favorites appear to be industrials and other capital goods, both vaunted weak-dollar beneficiaries and export plays. This group has already gained 14% this year and the stocks aren't demonstrably cheap. Health care, outside of Big Pharma, remains a common preference.
There remains little bullish conviction toward energy shares, and betting on continued outperformance by oil and gas players would qualify as a counter-trend maneuver. Utilities, despite excellent performance in 2004, are underowned by institutions and generally unloved by Wall Street. With a large unmet thirst for both electricity and yield, some smart money continues to overweight this group.
及时行乐之风弥漫股市
在人们喜迎收益季节、思考来年走势之际，华尔街似乎更倾向于及时行乐，唯恐过了这个村就没这个店儿。
随著年关将至以及主要指数在3年高点附近徘徊，许多专业投资者更加看重短线操作了，他们急切地希望在未来3周大干一场，以致于对2005年的市场前景并没有给以多大的关注。
从短线来看，每次回调引来的大量买盘已经让投资者大为振奋，早已不记得应该保持警惕。10月末以来不同凡响的反弹行情显然不会就此终结，但眼下的状况表明，市场总体上不想把目光放得更长远一些。他们似乎正沉浸在当前的热度中，丝毫没有考虑到下个季度的业绩前景。
然而经过精心包装的2005年预期照旧会如潮水般涌进投资者的电子信箱，飞进《巴伦周刊》的信箱。
诚然，对习惯性的预测嗤之以鼻甚至对当前走势逆向操作也不乏获利机会。但值得一提的是，市场粗略预计2004年标准普尔500指数将报收1125至1250点，而眼下该指数仍在1190点之下徘徊，现在看来这是一个非常准确的预期。
当前市场走势与去年及前年几无二致。年末反弹正在逐渐展开，公认的预测权威们普遍预计明年将有进一步的上涨空间。
尽管股市在2004年并非风平浪静，涨幅也难称壮观，但它终究告别了窄幅震荡格局，展现出温和上扬走势。尽管人们都喜欢井喷行情，然而准备不佳的投资者也很容易错过机会。
仔细研究一下去年的普遍预期，或许会发现这种普遍预期的背后隐藏著一些反向操作的依据。
一年前华尔街预计：股市的涨幅将轻松超过债券。小型股将逐渐让位于表现稳定的大型股上。进一步来讲，侧重点应该放在医疗保健、消费品及基础原材料类股上。
但结果证明这并不完全正确。股市的确强于债市，但差距不大。2004年标普指数的总回报率接近8%，而10年期美国国债的回报率也有5%以上。道琼斯公司债券指数的涨幅超过了6%。
仔细回顾一下，小型股才是真正值得投资的领域，小型股指数屡创新高，回报率是大型股的三倍。医疗保健类股整体低迷，当然主要受医药类股不佳业绩拖累，医药类股至今仍受冷落。原材料类股略微强于标普。
不过，了解一下普遍预期也是有好处的，因为这样就能掌握多数人的看法，而且还可以知道哪个方面的预期最容易落空。
带著这种思路，我们先看一下市场对2005年的普遍预测。
华尔街再次预计股市将强于债市。但事实上，存在一种可能威胁股市的重要因素：几乎所有人都相信美国国债收益率将稳步上扬。
市场普遍相信牛市将毫无悬念，人们对公司业绩增长、部分公司现金流丰厚以及散户投资者增加投资充满信心。利率上调已成定局，但未必对股市造成太大打击。油价一年年创下新高，人们开始满怀希望地认为，有朝一日能源成本的压力将有所缓解。
美国联邦储备委员会(Fed)仍然固守紧缩政策，这或许是件好事，因为这表明经济强劲。美元在经历短暂的反弹后可能再次走下坡路，但从总的来说，美元的贬值算是利好因素，因为这将提振跨国企业的盈利。通货膨胀可能微幅上升，然而大可不必担心其升至失控水平。
在种种令人宽慰的预期背后，存在著一个根本的风险──公司收益的动向。
由于明年业绩放缓已几乎成为市场共识，看涨人士开始设想这种负面影响已被市场消化。也许吧，但是对那些盘算著净利润增长10%、利润率从接近历史高点连续4年上涨的分析师们，还是有必要作个提醒。
摩根士丹利(Morgan Stanley)策略师亨利?麦克维(Henry McVey)表示，从目前分析师的预期来看，标普500指数成份股中将有78%的公司在2005年实现利润率增长。
即使没有其他因素干扰，被人们寄予过高厚望就有可能引发个别股票崩盘。出现一个盈利预警比比皆是的收益季节并非没有可能，而这种局面可能导致出现真正的恐慌性调整，而这种调整在2004年并不多见。
此外，考虑到分析师有高估来年业绩的习惯，上市企业明年的利润增幅其实可能只有4%-7%。在经济扩张放缓以及预计通货膨胀温和的情况下，标普500指数的24个分类行业中有三分之二的行业被认为明年将呈现两位数利润增长。因此业绩低于预期的可能性有增无减。
大公司现金充裕是无可否认的。但这些现金最终能否落入股东腰包就不得而知了。在缺乏理想的再投资项目的情况下，股东可能普遍希望公司能够进行大规模股票回购，增加派息额度。通用电气(General Electric)上周五刚刚宣布了150亿美元的股票回购计划并将派息提高10%。
也是在上周，并购面高潮迭起，有关强生(Johnson & Johnson, JNJ)和Guidant、及斯普林特(Sprint)和Nextel的并购传闻犹如为市场注入了一针兴奋剂。接二连三的并购的确会推高人气，但也会轻松挫伤企业价值。
那么这些独行其道的投资者理由何在？并购公司将继续汇集现金，规避风险，进而受到债券持有者的推崇，这对公司债务而言自然是极大利好。
尽管人气普遍乐观，但值得一提的是，相对冷静的经纪行策略师们并没有表明坚决的看涨态度，他们多数预计市场回报率将在一位数左右。在最近的调查中，部分个人投资者和通讯社的撰稿人已经有些眼花缭乱。但某些令人担忧的趋势（例如油价和美元走势）足以表明，不能说市场人气过度高涨。
至少1995年的壮观场面仍有重现的可能，94年艰难曲折的一年为企业生产率大幅攀升、企业合并、以及投资者蜂拥涌入股市铺平道路，95年股市上涨了30%以上。这同样也是一种意外。
但不要忘了Fed在95年开始降息，公司收益猛增20%，而之后并没有出现巨大泡沫，在此后的整整十年间也没有出现残酷的熊市。
