Disappointment after disappointment is taking a severe emotional toll on tech-stock holders, especially with few analysts providing encouragement. With Nasdaq rallies increasingly anemic and the index sliding from one low to another, pessimism has to be near an extreme. S&P senses that a capitulation phase is close, which could bring about a bottom for the market in general.
After a fourth quarter of 2000 that was deceptively strong because business customers chose to spend what money remained in their annual budgets, technology companies were too slow in reacting to signs of weakness in demand this year. But they're now moving swiftly, slashing capital spending, payrolls and other expenses. Though more earnings shortfalls lie ahead, S&P suspects the slowdown will last a few quarters at most. And the long-term promise of the information age remains intact.
Selling stocks at current depressed prices is not advisable. S&P recommends maintaining a portfolio allocation of 65% equities, 25% bonds and 10% cash reserves.
The Outlook is Standard & Poor's weekly investment advisory newsletter. Subscribe now to a 24-issue, 6 month trial of The Outlook for only $57 (annual subscription price: $298) by calling 1-800-852-1641. Kaufman is editor of Standard & Poor's weekly investing newsletter, The Outlook