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CNN Sunday Morning
Interview With Hans Kashyap
Aired September 01, 2002 - 10:13 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RENAY SAN MIGUEL, CNN ANCHOR: As Americans enjoy a Labor Day break, the U.S. economy is walking a tightrope between recovery and a recession. With that in mind, what's ahead for the stock market in September? Market forecaster, Hans Kashyap, president of Analytics Research Corporation, joins us this morning with his insight.
Hans, thanks for being with us this Sunday.
HANS KASHYAP, PRESIDENT OF ANALYTICS RESEARCH CORPORATION: My pleasure, Renay.
SAN MIGUEL: I have heard of a Santa Claus rally. I've heard of the January effect when it comes to the markets. Has there been a September rally? I mean, what does your research show over the years for the market?
KASHYAP: Well, it's interesting. If you look at the month of October, that's generally been historically a down month, but in order to go down into October, we actually generally make some type of high in September. Now there've been precedents to this, though.
For example, back in 1987, 1989, 1992 and so on, we made a high generally around August and then made a secondary high in September, from which we dropped into October lows. So to answer your question, historically, yes, there is a potential for a September high, but it's generally a short-lived high if we do get a rally in September.
And generally, it means we're going to drop into an October low again, unfortunately.
SAN MIGUEL: But also, aren't there this year some additional factors that are kind of out of the ordinary? Specifically, I'm thinking about WorldCom, Enron, ImClone. All of these things have helped really depress investor psychology during the summer.
I'm just wondering if another shoe drops in that particular arena, the corporate shenanigans arena, doesn't that kind of throw everything out of the water as well?
KASHYAP: Well, it does. I mean, there's always been -- it's a fate of flux. If you look at the stock market, and it's always been that way and certainly the items that you identified represent a significant lack of investor confidence in the market with all of these things happening and the accounting shenanigans. However, the market generally has to deal with things that it knows, and a lot of this stuff is water under the bridge. So given that, I think that what's probably going to happen, I mean, if you want to know our forecast for the short-term into September, is we think that the market is going to make some type of bottom. Actually, probably Tuesday or Wednesday, and then rally into the, you know, September 11 through the 21st time frame.
Almost sort of like a take back bin Laden rally, and then from that, again, Renay, since we're in a bear market, the most we can expect off of lows really is a 20 to 30 percent move up off the lows. And the high that we saw last week, up on the S&P to 966, represents a 26 percent rise.
So right now, unless there is a significant buildup of investor confidence back into the market, I think it's going to be jittery. And I think any rally is going to be short-lived. We certainly might have one, but I think ultimately to create a firmer base, we need better psychology, we need better numbers from the economy, and we need a larger technical base going back down.
SAN MIGUEL: I mean, it's interesting that you say that, because even as investors were kind of voting their lack of faith in corporate America by selling during the summer, from President Bush on down to all -- every kinds of -- all, you know, some other economists, they were talking about, you know, the fundamentals still being strong and consumer spending, which is what, three-quarters of the economy still going strong in the housing and things like that? How do we look with the fundamentals going into September?
KASHYAP: Well, certainly the engine that's keeping the economy alive and sputtering along, if you will, is consumer spending, and it's not business spending, interestingly enough. Even though consumers are scared to a certain extent, it hasn't hit home as significantly with the pocketbooks as yet. The consumer spending is still at a reasonable clip.
However, people are withdrawing money from the market. Just look at last week's figures of about $45 billion withdrawn from mutual funds over the course of the last month or so.
So there's certainly -- the impetus is there, but unless we really get business spending back on track, where we haven't had that, we can't really have sustained growth. And what we really need is the twin engines of not only consumer spending, but also capital investment coming back, which is business spending.
SAN MIGUEL: And that's, you know, we need the big corporations to start buying those big server -- big expensive server computers, and building up their networks as well to really take off.
KASHYAP: That's right. As well as the capital expenditures in terms of building new factories and so on, but for them to do that, there has to be some reasonable expectation of demand and growth.
And right now, most recently, Intel again gave a warning saying, well, we think our fall numbers are going to be weak again. So until there is that type of thing on the horizon, business spending is not going to come back on track either yet.
SAN MIGUEL: We shall see how things go in the fourth quarter of this year. Hans Kashyap, market forecaster, president of Analytics Research Corporation, we do thank you for joining us today.
KASHYAP: Thanks, Renay.
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