The Stock Market seems to have temporarily reached a point ‘at which it is insensitive to external developments. This could mean that the external developments are not very important, but one could find, for example, to the effect that spot crude oil and Product prices have been varying recently and there has been little or no specific response from the stock prices.
The Market should decline 50 to 100 points from here during the next several sessions. We were expecting buying pressure to reemerge those situations still under invested in stock and wanting to show a low cash position at the end of the quarter made their presence felt and as a result of continuing inflow of IRA funding.
During the course of next few months, stock prices will almost certainly encounter a correction, very possible a stiff one running to a couple of hundred points on the DJIA, the component, of course, by much bearish stock. The important thing to remember at that point will be that the drop-in interest rate is a lasting Phenomenon and the economy is likely to be moving upwards only in the second half and that the inflation will remain under control.
It is my view that these factors will produce a slant dash back in stock prices than before by the end of the year, largely reflecting anticipation of a sharply increasing ‘earnings.
Article extracted from this publication >> March 28, 1986
