More interest-rate cuts on the horizon. We expect the Federal Reserve to cut rates by another three-fourths of a point by summer, wiping out in six months the six hikes it made from mid 1999 to mid 2000. Brace for a new price shock at the gas pump. In this turbulent market, irrational anxiety is as foolish as irrational exuberance. In fact, extreme and widespread pessimism often signals a market bottom.
History shows that foundations of future fortunes are often laid in bear markets.
That's when true investors step in after short-term traders have dumped good stocks. Stocks of many midsize firms are appealing. Look for those with good earnings prospects that were ignored for much of the 1990s. When buying municipal bonds, check out those backed by insurance. Yield may not be much lower, and insurance guarantees both principal and interest.