Market Update

Since September opportunities to join the rally are few and increasingly far between. We saw one last Tuesday, but you had to act fast. That's been the story for seven weeks, despite the background of a nearly flat economy, high unemployment, a falling dollar, the mortgage mess, etc. Those negatives are being more than offset by the prospect of political change, the improving earnings outlook and more.

Earnings reports, with few exceptions, are coming in better than investors expected just as they did three and six months ago. Across a broad spectrum of American business, companies are doing better and, even more important, they are becoming increasingly optimistic.

Investors and Wall Street have not been sufficiently optimistic They succumbed to the wave of negative data about the economy, data we have been seeing and hearing every day for many months. They forgot that investing is about the future, not about today or last quarter.

While my outlook for the economy and profits is pretty mainstream that doesn't necessarily mean stocks will languish. Because stocks are undervalued relative to earnings and interest rates, and the alternatives remain unattractive, there is ample upside. Add in the buying pressure as more and more investors put cash to work and you will have a recipe for higher prices. That's what lies ahead. Not in a straight line, of course. There will be periods of profit-taking, as we saw last week. Brief ones.