A bull market storms ahead?

Forget the falling housing market and warnings of an economic downturn; forget that the stock market took six years to arrive where it was roughly six years ago, analysts remain confident that the stock market will stay strong in the months ahead. Pardon us if we’re a tad skeptical.

Unless they were heavily involved in energy funds, mutual fund investors won't have much to grumble about when they open their latest quarterly statements. While few may clap their hands and cheer, many investors will be pleased at the broad-based - albeit modest - gains in their stock portfolios. After swooning in the spring, most stock-fund portfolios benefited from a late-summer rally, the strength of which surprised Wall Street professionals and boosted the S&P 500 index to its highest level in five years.

The market's run-up was sparked by the Federal Reserve's decision in August to pause its two-year-long monetary tightening campaign. That move, together with a sharp drop in oil prices, dispelled Wall Street's fears that an extended bull market, now entering its fourth year, would soon end. With corporate profits still on an uptrend and long-term interest rates easing, many fund managers shrugged off worries about strained consumer finances and a housing slump.

Widespread predictions of a "soft landing" scenario for the economy encouraged managers to put cash reserves to work, mostly in large-cap, blue-chip issues. The blue-chip revival was confirmed when the Dow Jones Industrials index, representing 30 of the largest US companies, had record-high closes for three days straight last week.

http://www.csmonitor.com/2006/1011/p13s01-wmgn.html