The S&P 500’s 10% post-attack rally has cheered investors. But what if this is a bear trap? A sustained rally will require a rebound in profits, and that may not happen until 2003. Although the consensus forecast from Thomson Financial/IBES calls for a 15% rebound in S&P 500 profits in 2002, Stuart A. Schweitzer, global investment strategist at JP Morgan Fleming Asset Management, predicts profits will be flat or down 5% next year, to $42 per S&P 500 unit. That’s before writeoffs (and accounting changes), which total $18 per share for the 12 months ended September.
If the market continues its decline, Chuck D. Zender, who comanages $18 million in the all-short Leuthold Grizzly Bear Fund, will be prepared. His advice: The 300 largest stocks are usually good candidates for finding overvalued companies. He is particularly suspicious of companies trading at more than 30 times 2002 estimates.
Full story at Forbes.com
Andrew T. Gillies 