Serials by Kellogg

The Winter-Spring rallies of 1998, 1999 and 2000 were clearly slowing down. Each rose to a lower point relative to its year-beginning. This progressive slowdown left the seasonal bottom for 2000 well below its year-beginning level unlike in previous years (see Chart). Even a strong Fall rally won't move this year's close to much higher than between 1468.7 and 1531.2 or from flat to up 4% for the year.

The year 2001 should be a recession year, or whatever will pass politically for a slowdown. We are already seeing signs of it; therefore, next year's Winter rally could easily fizzle as the market runs out of steam in the face of concern for the economy and uncertainty about a new Administration.

This is likely to be the beginning of a transition into a long consolidation phase for the market that we have been predicting. A repeat performance in 2001 would confirm it. While the talk shows will rediscover value-investing, addictive behavior is hard to break so we expect to see even more abrupt and irrational price swings as hot-shot fund managers struggle to find their way.

A defensive-growth strategy is probably the best policy with the MSCI World Index as a better benchmark than the S&P 500 Index for most growth oriented investors. Success will be in avoiding big mistakes.