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As 2003 draws to a close, investors and Wall Street are looking into the crystal ball to see what 2004 might hold for them. I've taken the liberty of compiling a wish list for both.
Wall Street hopes the bull market of 2003 continues into 2004. A bull market is defined as a move of 20 percent or more off of the lows. The Dow managed to rally 25 percent from the close of 2002, and up an even more impressive 43 percent from the lows hit in October of 2002. The Nasdaq has soared 50 percent from the close of 2002, and jumped a scorching 8 percent from its October lows. The S&P notched a 26 percent gain for 2003, and up 43 percent from the lows hit in October of 2002. And while nothing goes straight up, smart money bets that in this election year, stocks will continue to rally with dips being seen as a buying opportunity.
Wall Street also hopes to see more IPOs and more corporate combinations. The financial world's big boys get a lot of their fees from brokering mergers of equals and takeovers of the weak. Wall Street firms also ring the cash register when bringing a private company public with initial public offerings. IPO pickings were slim this year, only 84 coming to market and raising just under $15 billion, according to Thomson Financial, but that number masked the fact that the majority of those offerings came in the fourth quarter. Traditionally, underwriters don't bring new stock issues to market in the last two weeks of the year when volume is below normal, but look for new issues to come to market in the latter half of January.
Wall Street would love for New York State Attorney General Eliot Spitzer to disappear into thin air, after unmasking conflicts of interest between investment bankers and analysts and shining light on mutual funds' betrayal of shareholders' trust. But if investors have any say-so, it won't happen. In fact, no matter what his motives, Spitzer has done more this year to help the individual investor than even the SEC, which is seen as being behind the curve in identifying violations of and protecting individual investor rights.
For their part, investors hope the economy continues to strengthen, boosting corporate profits. More jobs would also be nice, but as long as productivity is high, businesses have no incentive to hire new employees. And while investors are cheering the market's 2003 performance, many are painfully aware that the major averages are still quite a ways from their all-time highs reached in early 2000: the Dow is still 11 percent from its peak; the S&P 500 must gain another 29 percent to finally break even; and the Nasdaq requires a 61 percent gain to do the same.
Investors could also do with fewer scandals and more transparency, but if history is any indication, people shouldn't hold their breath. Change comes slowly to Wall Street, and as long as it holds the upper hand, investors will continue to see their interests take a back seat to those of financial firms. And investors will get little help if any from the federal government, as legislators and executives will be preoccupied with election-year posturing, fighting terrorism and economic stimulus.
As the economy strengthens the prospect of higher interests rates looms on the horizon. And while rates are at 45-year lows, any rise will dampen the housing sector and possibly consumer confidence, to say nothing of the value of bonds held in their portfolio.
We'll take a look at the final year end numbers and gaze into our crystal ball this Friday. Please join us.
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