BCA Research - Independent Investment Research Since 1949

BCA Research - Independent Investment Research Since 1949: "A Maturing Equity Bull Market 12:21:00, August 28, 2007 According to our Global Investment Strategy service, the recent shakeout in risky assets should be regarded as part of the maturing process of the equity bull market. This episode is very similar to the recession fears of 1998, which prompted Fed easing. The subsequent rally in stocks was powerful but led to increased volatility and ultimately ended in a crash two years later. We suspect that a similar pattern could play out this time around. Equities still offer reasonable value and should receive significant upside as investment capital gets funneled into fewer assets. Narrowing breadth of asset price inflation is a typical characteristic of a maturing market. In this cycle, commodities, government bonds, real estate and credit products have already largely been inflated but stocks still have room for further multiple expansion once the current turmoil in the credit market subsides. However, investors should be prepared for permanently higher volatility, which tends to accompany richer valuations. Bottom line: The bull market in equities, while in a maturing phase, should offer investors significant upside over the next two years."