Between surprise and doubt (when aren't there doubts in the stock market?) comes a first half of the year that, against all odds, has become the star semester of the last five years, in which we have seen the Dow Jones above 9.000 and our Ibex above 7.000. We have to go back to 1998 to find such a bullish first half (although that year the Ibex rose almost 40% in the first six months and this year it has risen 15% since January) and this fact, coupled with the fact that the last six semesters have all been bearish, is once again fueling expectations that we have definitively left the bearish phase behind.
It was precisely in 1998 when, after the euphoria, came the so-called Russian debt crisis, a crisis that actually revealed the exhaustion of the growth model of the nineties, an exhaustion anticipated by the mini-crash of October 1997, and which at the same time showed that any further rise in the Stock Markets, from the 11.000 that the Ibex had marked in July 1998, would only be the prelude to a greater and more painful fall, as indeed happened from March 2000 onwards.
Now, in July 2003, we face two less-than-encouraging realities that coexist, however, with somewhat more optimistic expectations. The first reality, which has led the Fed to set interest rates at 1%, is that the US economy will struggle to return to the dynamism of the late 1990s, as we have seen in the weak GDP of the first quarter, because it still has imbalances to address. The second reality, highlighted this week in Madrid by the ever-impactful Larry Ellison, is that the technology sector is now mature, and its future growth will be more in line with that of sectors like automotive or consumer electronics than with the growth it achieved in the 1990s. These two realities—the US economy and the mature IT sector—are the starting points for building the growth model of the 21st century.
The above creates a certain air of deflation in the US economy, an air that permeates the Fed's latest statements. But to jump from there to deflationary pessimism is, at the very least, an exaggeration. Long-term bonds, whose yields have rebounded since mid-June, and the stock markets do not appear to be in such a pessimistic mood, but rather reflect a more encouraging expectation of moderate growth and low inflation.
It's healthy and desirable for stock markets to correct, and it's quite logical that they will do so at some point this summer. It's also logical that the dollar will rise after the drastic drop it has accumulated since the beginning of the year. But, just as everything points to the dollar continuing to fall—among other things because it's one of the ways to continue correcting the imbalances in the US economy—everything also points to us seeing stock markets before the end of the year at levels higher than those seen during the first six months.
The first week of July will bring us some very important data, such as the ISM manufacturing and non-manufacturing indices in the US and the June unemployment figures, also in the US, as a prelude to a July in which corporate earnings will take center stage.
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