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Is the bull dead?
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October 11, 2000: 6:14 p.m. ET
Concerned investors, eyeing the market's downdrift, wonder how to respond
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - Carrie Cole has never had it so hard in her 13-year career as a financial adviser.
"This has been my toughest year," the Dearborn, Mich.-based certified financial planner said. "People have higher expectations. People want big returns."
They haven't been getting them in 2000. The 25 portfolios she manages are down. That makes her clients mad. They want her to justify the one percent fee she will claim this year.
 Investors have become spoiled. The market has been on a 10-year bull run. The Dow Jones industrial average closed higher every year in the 1990s.
The second half of the decade was particularly strong -- it gained more than 15 percent every year.
But there are signs that run has come to an end. The Dow is down 9 percent this year. It's on pace for its first one-year drop since 1990, when it lost 4 percent over 1989. Its previous down year? Way back in 1984.
'An end to the bull market in Nasdaq techs'
Nasdaq has fared worse. On Wednesday, it flirted with its lowest point of the year. It closed four points off it.
After steady losses in late September and early October, tech investors are no better off than when techs bottomed in May.
What are investors to do? Wait for the next earnings disappointment? Market strategists are watching for the bottom. But none is keen to predict this is it. There has been little to gain for investors to stick their necks out.
 Jeremy Siegel, a finance professor at the University of Pennsylvania's Wharton School, has been advising people to shave technology for some time. He still thinks that's good advice.
"I wouldn't say this puts an end to the bull market," Siegel said. "It puts an end to the bull market in Nasdaq techs."
The tear that techs, particularly Internets, went on between October and March was virtually unprecedented, he said. Now that it has collapsed, it will not rebound right away, he said.
Investors who were trained to buy on the dips have retested those bottoms. They will not see anything like the gains of the past few years in their hottest growth stocks, he predicted.
"Once you get beaten down like this, you're going to be churning for quite some time," Siegel said.
If you haven't shifted, it may be too late
Hindsight is particularly clear at the moment. Scott Kahan, president of Financial Asset Management in New York and a certified financial planner, shifted his clients away from tech earlier this year.
He targeted out of favor sectors such as real-estate-investment funds and health-sciences companies -- drug stocks and biotechs.
When investors become infatuated with a sector, it may be time to move on. And it has been all about tech. Investors who were overweight should have been shifting from that into out-of-favor sectors, Kahan said.
Now it may be too late. "If you haven't done anything and you were overweighted in technology, you may not be overweighted anymore," Kahan said.
He does not think investors should reposition into money markets or CDs. Those only offer short-term protection. You also run the risk of having your money on the sidelines when the market does rebound, he said.
"We'll test the bottom now," Kahan said. "People are panicking, and that's usually the sign that we're close to the bottom."
Has the market hit bottom yet?
Market watchers are searching for signs that techs are hitting lows. But they are not confident. If Nasdaq pierces its May low, watch out, Siegel said.
Investors are also searching for any weakness in their holdings. Big-cap techs were "priced for perfection," pundits say. Any disappointment on fundamentals -- earnings, revenue, long-term growth -- sees a swift correction.
 In that environment, it is vital to watch the financials of whatever techs you hold, according to Rick Jandrain, chief investment officer at Banc One Investment Advisors.
For instance, Lucent was dealt with harshly in January, when it lost 22 percent in a day on news of poor performance. Now it has disappointed on earnings again. It suffered again.
"You have to be able to distinguish between when the fundamentals have truly deteriorated versus a one-time announcement," Jandrain said. There is clearly a problem with Lucent's fundamentals, he said.
Investors may be sick of hearing about buying opportunities. But Jandrain said volatility does offer the chance to get into solid companies at low prices.
For instance, Cisco Systems (CSCO: Research, Estimates) has tested $50 three times this year: in January, May and now. It is near bottom of its huge range again. Jandrain feels comfortable Cisco will be around for a long time.
Jandrain also likes Medimmune (MEDI: Research, Estimates) in biotech and Watson Pharmaceuticals (WPI: Research, Estimates) as a generic drug maker. Both saw sharp corrections recently that he considers buying opportunities.
"Watson, you could have got 10 bucks cheaper," Jandrain said. It has since recovered. "You just have to take advantage of the volatility."
Despite increased doubts, economy still strong
The difficulty is identifying strong companies. Last year investors became too confident because all their investments made money, financial planners say.
The wind is no longer at the market's back. It is not carrying weak companies. Hence the sudden bailout when investors sniff vulnerability.
Suddenly, retail investors are not so hot on that tip from Joe In Accounting. They have reverted to a long-term approach and don't watch the market every day. In that sense, the correction is good, planners say.
There are more reasons for economic doubt than last year. The high price of oil, low euro, and an election year all spook Wall Street, which does not like surprises.
As mutual funds end their fiscal years, managers are offsetting gains from the start of 2000 by taking losses. That tax-driven selling has exacerbated investors' edginess.
But there are plenty of days when the Dow rises and Nasdaq falls, Kahan pointed out. (Both fell Wednesday.) Market watchers take that as a sign investors are rotating positions, rather than leaving the market.
The big picture of the economy is positive.
"You've got to use October, buying tech and health care," said Tom Galvin, who heads investment strategy for CS First Boston. "I don't think it's the end of the bull market."
Growth is slowing. But that doesn't mean growth is ending. "Valuations are coming back to earth," Galvin said. But he believes investors will return hungrily to growth in 2001.
Still waiting for a rebound
The success sectors of 2000 have been successful because they're defensive -- the "not techs." Of those, Galvin is most optimistic that health care can continue to register good gains next year.
He is watching for signs the Federal Reserve will cut interest rates next year. Consensus on that would give him confidence, Galvin said. But he thinks the selling is overdone. "This is the classic kind of market angst that we get," he observed.
Cole, the financial planner, is waiting for a rebound in Nasdaq. When that comes, she plans to use exchange-traded funds to target specific areas of Nasdaq for her clients.
But she is waiting. She likes to reposition in November, when the worst period for the market is past.
"We have a few more weeks yet before we have to make our final decision," Cole said.
* Disclaimer 
-- Click here to send e-mail to Alex Frew McMillan
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