Bear Stearns' Trahan Gets Religon

Saturday, March 04, 2006 | 07:30 AM

Bear Stearns' Francois Trahan is pulling in his horns.

He was amongst the crowd making the incorrect 2004/05 call for a rotation into Big Caps, and has been mostly Bullish since.

He is now getting some religon, and recognizing the weakening longer term elements:

THE MARKET'S RECENT ATTEMPT AT A BREAKOUT APPEARS MORE CONSISTENT WITH A LAST GASP, RATHER THAN A NEW BEGINNING... if the recent rally marked the start of a sustainable upturn, then market leadership should have been concentrated in early-cyclical segments, such as consumer discretionary and financials, whereas leaders have been sectors that typically fare well in the latter stages of a market move.

INVESTORS SHOULD HAVE TAMER EXPECTATIONS ABOUT THE ROAD AHEAD...the conditions that prevailed in October, when the rally essentially began, have changed... technical indicators in October were conducive to a near-term rebound in stocks at a time when leading indicators began to reaccelerate.... for leading indicators to continue to accelerate from here is a tall order with the Fed in tightening mode.

WHILE THE INFLATION DEBATE SEEMS TO HAVE MODERATED RECENTLY, SOME INDICATORS SUGGEST THAT INFLATIONARY PRESSURES COULD SOON BECOME AN ISSUE AGAIN, EVEN IF ONLY TEMPORARILY... besides traditional inflation hedges such as gold, real estate and other commodities, investors may wish to consider equity segments that benefit from a mild pick-up inflationary trends through pricing power such as telecom.

VARIOUS MARKET SEGMENTS CAN PROVIDE CLUES ABOUT WHAT TO EXPECT FROM ECONOMIC FORCES AND HOW TO BEST POSITION PORTFOLIOS ACCORDINGLY... at this time, economic-sensitive currencies suggest that a further deceleration in the global growth outlook could be around the corner... some specific equity segments currently signal that housing industries of the market could be due for a slowdown.

A KEY REASON WE DO NOT THINK THE RECENT EQUITY RALLY IS SUSTAINABLE IS THAT THERE IS STILL TOO MUCH OPTIMISM IN THE MARKETPLACE... when investor sentiment lingers in bullish territory, the market typically becomes vulnerable to the slightest bit of bad news... furthermore, sustainable rallies tend to begin with sentiment is depressed, rather than when it is already stretched.


Francois Trahane,
Bear Stearns
NY, March 2006

Saturday, March 04, 2006 | 07:30 AM | Permalink | Comments (15) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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Barry, My father sent me this link to Pimco. I read Dialynas' Marshall Plan which is included in this link. It is from 2004, but still deals with contemporary issues. I found it to be a pretty understandable and comprehensive view of all the dark specters that have been flittting around the periphery. Perhaps you and your readers would have an interest.

Of course I realize the fact that I read something that my father (who has grumbled about all of the signs that portend trouble for the last 10years) sent me and actually agreed with it officially makes me old. Now we have a whole new dimension to our relationship where we can discuss impending economic doom and gloom. How did I come to this?

Posted by: Leisa | Mar 4, 2006 11:37:34 AM

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