The intra day swings in the market continue to be swift and severe. So much so, that it’s much easier on the mind to just turn off one’s machine and focus on other more pressing matters, like why my electric bill keeps going up every month.
But for what it’s worth, most of the major indices were off by 1.5% or more as of 2pm today, but have rallied in the last forty five minutes to be off by just about a half a percent. Technology has really turned around, with the NASDAQ 100 roughly flat after being off as much as 1.8% for most of the day.
In my opinion, the turn in the market coincided with comments by John Chambers, CEO of Cisco Systems, at a Morgan Stanley conference he is attending. I used to go to this conference in Phoenix for years and met with John one on one and personally on many of those occasions.
At 3pm EST, he told attendees that he’s “even more comfortable with their long term guidance since their last call and sees the downturn as short and shallow.” As we’ve stated in our past Economic Updates and blog entries, Chambers has a pretty good hand on the pulse of the economy and as a result, can really have an impact on the stock market, particularly for technology stocks. He’s earned this influence the difficult way, by being more right than wrong. The broad based nature of his business and the daily sales information he gets from his salesforce likely gives him better data than what most economists and investment strategists can dig up.
John tends to call it like he sees it. His words clearly signal that February was an improvement over a very difficult January and that his visibility has improved. While it can, of course, quickly turn down just as fast, it is an encouraging data point, nonetheless.
We continue to believe that in an economic environment where overall growth is scarce, growth stocks will shine. In a nutshell, going long innovation and short the economic cycle might not be a bad approach. As we finish up the last of earnings reports this week, the storm clouds should fade, enabling investors to get a clearer picture of the differences. The comments from Chambers this afternoon will only help.
