Wall Street's Worst Year Winds Down
Monday, December 29, 2008SUSIE GHARIB: The collapse of Dow Chemical's big merger only adds to the uncertainty and anxiety on Wall Street. It's been a devastating year for investors with the major stock market indexes on track to post their worst declines in decades. But as Erika Miller explains, most analysts expect the New Year to be much better than the current one.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Most stock investors are eager to close the books on 2008 after a year of painful losses. With two trading days left, 2008 is all but certain to be the worst year for the Dow Jones Industrial Average and the S&P 500 since 1931. It's likely to be the biggest decline for the NASDAQ since its creation in 1971. All three indexes are down at least 36 percent. Clearly, the stock market will face major hurdles heading into the New Year, including economic recession, tight credit conditions and a reluctance of consumers to spend. However, S&P's Alec Young predicts 2009 will be a turning point.
ALEC YOUNG, MARKET STRATEGIST, STANDARD & POOR'S: Generally speaking, we are looking for a positive year in 2009. We forecast the S&P 500 will finish 2009 at 1025, roughly 20 percent above current levels. But we do expect the strength to be back end loaded. We expect choppiness to continue early in the year.
MILLER: The reason is uncertainty about the economy. Many on Wall Street believe the recession will worsen early next year. But they are hoping a recovery will take hold by the summer, thanks to the government's aggressive fiscal and monetary stimulus. Wachovia's Scott Wren advises investors to start buying stocks now.
SCOTT WREN, SR. EQUITY STRATEGIST, WACHOVIA SECURITIES: By the time the news is good -- even most of the news is good -- the stock market is going to be considerably higher. So I think you want to try to start positioning for the change now.
MILLER: He also points out there is $8 trillion of cash on the sidelines, ready to be put to work. That's the most money available than at any time in almost two decades.
WREN: I think even if a small fraction of that money decided to get into the equity market and I think that is where it's going to go, that should be a positive boost.
MILLER: But other strategists, even bullish ones, think it's still too early to load up on stocks.
YOUNG: We don't see the economy stabilizing for several months and we think that that's going to keep a lid on stock prices in the near term. But we do think that by the end of '09, we're going to be looking at a much healthier macro environment and the stock market should start discounting that sometime in the early summer. So we are looking for a stronger second half.
MILLER: So, what would it take to signal a major turnaround for stocks? Strategists would like to see recovery in the job market and in real estate. That they say, would encourage consumers to start spending money. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
