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A March 30, 1998, WSJ piece reflects the optimism of this market, substituting earnings for dividends and ignoring any potential equity risk premiums.

Interest rate jitters certainly had its impact felt among the sectors, with some of the interest sensitive groups getting hit hard.

If you’ve been in this business 30 years you’ll remember Adam Smith’s “The Money Game”. Read it again. Those who never read it, find a copy. Also, the results of our 1998 reader survey and a parody worthy of the “Bawl Street Journal” provides the first totally honest daily stock market report.

Near term, bond market now stabilizing after being roughed up during most of April…We see no imminent Fed loosening or tightening in the cards at this point.

Some clients suggested that our use of normalized earnings distorted last month’s study of P/E ratios in low inflation environments. Using a three year centered average of earnings produces results quite similar to last month’s study.

The market finished the first quarter of1998 strong, with the S&P 500 up 13.5% and the Dow Jones flirting with the 9000 milestone. Expectations for April? More of the same. Nothing on horizon to shake individual investors’ confidence.

Net inflows into U.S. equity funds extremely strong and now nearly 30% ahead of impressive 1997 levels. Fund flow controversy revisited. Still no consensus regarding December’s huge discrepancies between the top two data providers on the mutual fund cash flows.

Among the Big Cap Bounce qualifiers, it did look like there was a bounce in January and February, but closer examination reveals it was really a Tech bounce.

Jim Floyd attempts to answer which is more meaningful: reported, operating, or cash flow? Also, what best describes current earnings reporting requirements (FASB 128)?

The Leuthold Group made no purchases in Asian emerging markets in March. Further purchases will be made on significant weakness, but in February and March the “gloom and doom” stories subsided.

Fed’s “Households” equity transaction data seems to infer Main Street investors continue to be big sellers of individual stocks.... WRONG!

March performance was outstanding, with seven of the eight active sectors beating the S&P 500 return.

Low Inflation and the justification of expanded P/E ratios. Low inflation does justify expanded P/E ratios...However, how much of an expansion is warranted?

Near term, bond market now stabilizing after being somewhat ahead of itself...No Fed loosening or tightening in the cards at this point.

Buying 10% position in Housing. Moved up to Attractive last month, and currently the fourth highest ranked per our SS Scores. Expect current economic environment to be favorable for Housing.

Major Trend Index turned Positive in early February...Expect market to move higher over next few months as long as Main Street keeps fueling Wall Street.

Domestic equity inflows for 1998 lag last year’s levels, but still very strong...However, bond and money market fund flows YTD are significantly ahead of1997’s pace.

After weighing the pluses and minuses, it still looks like big cap leadership to us...small caps lacking sponsorship and liquidity at this point.

On a year to date basis, the entire bounce universe is up almost 13%, outperforming the S&P 500 (+8.1%). Maybe there was a bounce this year, but it really seems that Tech stocks were the driver.

Steve’s thoughts on 1998 Stock Market Leadership, Volatility, Japan, Gold and Inflation.