The market struggled back over the last two days, regaining about half of Monday's loss. The overriding obsession over the next three weeks is the fear of an interest rate hike at the May 19 Fed meeting. We will have periods of gloom and joy, depending on the economic news of the day, beginning with Thursday's reports regarding employment costs and 1st quarter estimates of Gross Domestic Product.

You will hear all manner of predictions of what Greenspan and company will and won't do. The fact of the matter is that he probably doesn't know today either. If I had to bet, it would be that there will be no interest rate hike. I don't think earnings are excessive, it's an election year and the Fed is politically sensitive even though they vehemently deny it, and the Asian effect is not over and we may yet see the worst of it. I heard a recent report that Asian goods are pouring into the United States, which probably means significant price-cutting by them, which is always an important inflation lid.

What should an investor do? More of the same. Long-term regular monthly investors should maintain their program, and other long-termers should just sit tight. If you try to outguess this market you will probably guess wrong, and it will most likely continue its upward march over time. Short-termers should still avoid margin and make only those investments you really feel strongly about - where you believe you have a good understanding of the stock and its near term prospects are very good. Short-termers who are especially uneasy should consider selling half their positions on both stocks that have had a big increase, and those losers with diminishing prospects. I'm still a Bull, but I am crouching a little deeper in my fox hole. Stay tuned.

The Market Pro - April 29, 1998