… And What For An Encore?

Is the stampede still on, or is the bull market soon to be corralled?

We’ve all got questions about the stock market in 1997. As two good years have: piled gains upon gains, investors are scratching their heads, wondering if the good times might soon end.
We at BLACK ENTERPRISE had an opportunity to ponder just what’s in store at our annual Investment Roundtable, on January 16. Just as we gathered five experts from all ends of the financial industry, the market was in an odd place. Many analysts were arguing that stocks were overvalued, with the S&P 500 trading close to 20 times earnings. Equities nonetheless seemed to rise on helium. A Dow of 6400 had long been left in the dust and, with the index pushing 7000, the whispers predicting a correction–a downturn in stocks–were gaining volume.

Our expert panel feels a drop is likely this year, with any correction likely to be triggered by a slowdown in corporate profits. On a more heartening note, however, our experts said good stock picking could still provide gains. They also pointed out opportunities in fixed income instruments, such as Treasury bonds and international equities.

Our panel included two portfolio managers: Stephon Jackson of Durham, North Carolina-based NCM Capital Management Group, the largest minorityowned money management firm in the U.S. with $4 billion in assets.

Jackson, director of equity research and a portfolio manager of the Third Century Fund, a Dreyfus Fund, which gained 24.33% versus 23% by the S&P 500. C. Kim Goodwin is senior vice president and portfolio manager for Boston-based Putnam Investments. Among her duties, she comanages the highly successful Putnam Vista Fund which invests in mid-cap equities and has $2.7 billion in assets.
For advice on fixed income, we turned to Charles Self, a senior vice president and chief investment officer for LaSalle Street Capital Management of Chicago, an asset manager with $5 billion. Deborah Frazier is an assistant vice president and senior financial consultant at Merrill Lynch, one of the largest investment and financial services firms in the world. Christopher Williams, CEO of The Williams Capital Group, a broker dealer firm that has a research department, operates in New York.

BE: After two good years, should we expect 1997 to be as smooth?

DEBORAH FRAZIER: One of the biggest concerns we have is whether individual investors are really prepared for a market in which you can’t make money as easily as the past two years.

BE: What are the chances higher inflation and interest rates might sap the market?

CHARLES SELF: We think the economy will continue to grow moderately in 1997. Federal Reserve policy will be steady again this year. Alan Greenspan now has the bond market doing his work for him. Whenever it looks like the economy is getting strong, interest rates go up. Inflation is well behaved and growth is moderate.

BE: So you think the Fed is going to tiptoe around raising rates this year?

SELF: Whatever they do will be moderate one-time events. If the economy looks stronger than expected in the first half, they will raise rates once. That will likely slow the economy

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