"At some point in the next 12 months, I think the U.S. and world equity markets will have a 50 percent rally, but the timing of that recovery and what happens after the rally will depend on the state of the U.S. and world economies. Both factors are highly unpredictable. I tend to be an optimist about both, particularly when there are so many pessimists, but I could be wrong. A double-dip and deflation would cause stocks at least to test the lows of last summer and perhaps break them. The new year will be one in which to stay open-minded: Be ready to change both your mind and your [asset] allocations."

-- Barton M. Biggs

Global Strategy,

Morgan Stanley & Co.

New York

"Officially, the Dow needs to close above 9077 and the S&P above 965 before their double bottoms are complete. . . . The beaten-down Nasdaq, loaded with technology stocks, has been the leader by far. With many tech stocks in the $1 to $10 range, a small price movement is a big percentage mover. The operative word used by tech CEOs, analysts and Wall Street is 'hope.' They 'hope' the worst is behind them. . . . Until we see an across-the-board move in stocks with new leadership emerging, our advice is to stand aside."

-- Dan Sullivan

The Chartist Mutual Fund Letter

Seal Beach, Calif.

"Smiles remain on the faces of bond investors, as bonds will outgain stocks for the third consecutive year. Practically every major bond index, except for high-yield, is in positive territory, with mortgage-backed and long-term treasuries among the best performers. In fact, bonds performed especially well during November, [posting] gains not seen in more than a decade. These gains came despite hefty gains in the equity market, which is an oddity since . . . the two assets classes are not strongly correlated. . . . Geopolitical instability, mixed economic data, and the U.S./Iraq situation have all contributed to the high returns in the bond markets. Yields are likely to remain low until one or more of these issues turn favorable, which isn't likely until the middle of the first quarter of 2003."

-- Commentary

Union Planters Investment Advisors

Memphis

"Unfortunately, lower [interest] rates are not going to restore pricing power or eliminate excess capacity, which is obviating the need for companies to increase capital spending. As layoffs mount and the unemployment rate edges higher in the first half of next year, consumers will spend less. Money managers are overlooking these issues, afraid they will miss the new 'bull market.' The current rally is raising expectations for 2003 that are unlikely to be met. The secular bear market in stocks is not over."

-- E. James Welsh

The Financial Commentator

Carlsbad, Calif.