Market should enter millennium with ease

Market Analysis
Year-end selling is typically something we see during the month of December. The stock market has a tendency to dip in the fourth quarter, only to recover at the beginning of the New Year. The January effect, as it has been phrased, is the money that finds its way back into the market at the beginning of the year, usually propelling stocks higher during the month.

The average U.S. family will spend close to $500 this holiday season.

Normally the selling moves in stages, but the bulk of it takes place in December. However, this year it appears to be occurring a month in advance. Some investors are looking to tidy up their portfolios, liquidating some of their holdings to best position themselves when Uncle Sam comes calling in April.

Certainly, some investors are looking to take some money off the table as they head into the holiday shopping blitz. According to one study, the average American family is going to spend close to $500 this holiday season. The same study said that more than 10 percent of Americans would spend over $1,000.

However, this year people are also concerned with Y2K, and the unknown effects it might have come Jan. 1. We shouldn't expect too much disruption with respect to the millennium bug. Retail investors - or emotional investors, as they are often called - are likely to move frantically in and out of stocks for the rest of our lives. They might even be a little more sporadic as we approach the end of December, but remember that they have a minor impact on the direction of stock prices.

I am willing to accept the risk associated with Y2K problems.

Institutional investors are much more aware of the companies they own, the management, key competitors, etc, in addition to the preparations those companies have made in advance of the New Year. Most companies have taken the appropriate precautions, and although that doesn't mean the ball will drop without a hitch, all will be fine when the stock market opens the week of Jan. 2.

This brings me to the most important point of all. Many of you might be aware of the staggering figures that have been reported regarding the amount of money sitting on the sidelines, waiting for this historic date to pass. I am not even going to speculate as to how much is actually out there. But don't lose sight of the promising effects history says January always brings to the stock market, coupled with the enormous amount of money waiting to re-enter that market when it is confirmed that earth is still the third planet from the sun. I am willing to accept the risk associated with Y2K problems in order to capitalize on the potential upside that ensues.