Seeing Beyond the Stock Market Slump

The Dow Jones industrial average dropped for five straight weeks through Jun 3, with one disappointing economic report after another. Still, the grim news is doing little to reduce bullishness among US money managers and market strategists, including JPMorgan Chase's David Kelly and Liz Ann Sonders of Charles Schwab, who say strong profit growth and valuations that are below the historic average will lift equities this year. The economy is still growing, albeit at a slow pace, and sufficient for corporate revenues, corporate earnings, and corporate cash flow to advance, says Bob Doll, who helps oversee $3.65 trillion at BlackRock, the world's biggest money manager. At its Jun 7 level, the Standard & Poor had a price-to-earnings ratio of 14.6 based on the past 12 months' profit, compared with an average of 18 over the past 10 years. Many strategists see that as a positive sign.