Wall Street Week Ahead: Bulls, bears and wallflowers

Fri Aug 10, 2012 8:30pm EDT
 
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By Edward Krudy

NEW YORK (Reuters) - It's another one of those moments that always follow a big move in the stock market: Either you're a believer - or you're not. Right now, the market has its fair share of both.

The S&P 500 is up 12 percent so far this year. Through July, it had its best first seven months since 2003 and its second- best seven-month run since 1998. That sounds like a bull market.

But there is clearly a disconnect between the way markets have performed and the high level of caution among many investors. That is mainly due to the perception that things have the potential to go horribly wrong - incredibly fast.

The danger for investors is that they focus too much on the potential risks, such as the break-up of the euro zone, and end up getting left on the sidelines when markets move higher as they have done since the start of June, said Doug Cote, chief market strategist at ING Investment Management, in New York.

"We are in a bull market," he said. "The mistake investors have made is too much attention on global risk, and not enough attention on fundamentals that are very resilient."

Cote believes that record high aggregate earnings for S&P 500 companies this year and signs of improvement in the labor market mean investors should be taking on more risk rather than fretting about the dangers stemming from Europe's debt crisis.

NO EASY CHOICES

But for the more equivocal souls, the market is presenting a difficult dilemma, and strong convictions either way are elusive.   Continued...

 
Morning commuters are seen outside the New York Stock Exchange, July 30, 2012. REUTERS/Brendan McDermid