Consumer spending remains a cause for concern. A decline in retail sales in April has proved to be a fluke, and in May and June consumers have returned with a vengeance. Higher rates have not yet slowed down the pace of car sales, for instance. Stock investors remain jittery, and rallies have been interspersed with profit-taking whenever investors feel that the Fed has ammunition for another tightening. At the same time, another danger is a hard landing, and Wall Street is also watching the impact of a possible economic slowdown on corporate profits.
Profit warnings result in a savaging of stock prices.
However, on the whole the consensus is optimistic about the stockmarket. In May and June the consensus predicted trendless trading with periods of stock price increases followed by declines during the entire 12-month forecast period. In July, the consensus sees a steady upward trend from current levels. Moreover, the consensus expects the market to rediscover its taste for 'new economy' shares, as well as a broad range of stocks. The index level as of July 24th 2000.