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Lagging Earnings Interest Rates Make Year-End Rally UnlikelyMany European fund managers arent going to find anything good this Christmas to be merry about In most years particularly lackluster ones there seems to always be the year-end rally that puts the fund managers performance up to the standard And makes the woes of the years financial problems on either side of the Atlantic a little easier to swallow To be sure this hasnt been a year for the books The DJ Stoxx 50 has inched up a miserly 08 and the DJ Stoxx index is down 05 with European stocks largely stuck in a trading range since March Some investors had been hoping summertime concerns over interest-rate increases and disappointing corporate earnings might dissipate in the autumn but the fourth quarter has so far squelched such expectationsYear-end rallies are very popular says George Hodgson a European equity strategist for ABN Amro in London People think that they always happen and are bound to happen especially this year because of the dull start to the fourth quarter But they are more notable for their absence than anything elseFrom what I gather the main concern is the interest rates Many had been hoping that by the end of the year there would be a possible rate cut in early 2001 But instead experts expect the rates to continue to rise into early first quarter of next year In turn this is smothering the European equity markets and is putting upward pressure on bond yields The central banks are greatly surprised by inflation and arent in any rush to cut the rates Acutally when the US Federal Reserve meets this week it is expected that they are going to raise the rates at least one more time before they consider lowering itThe other main concern for equities is earnings which continue to disappoint analysts which in turn causes them to lower their profit forecasts for next year The two
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