… And What For An Encore?

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

when baby boomers are getting older and increasing demand for fixed income securities. So we think by year-end, interest rates could be 50 basis points, to one percentage point lower than they are today. But when investing in the fixed income, you just want to pick points in the cycle where it’s good to lock in the rates.

JACKSON: Charles, do you feel like the linkage between the bond and stock markets is going to be stronger or weaker, going forward?

SELF: As long as earnings growth is there, then there is a correlation. If earnings start to decline, then it doesn’t matter what happens in the stock market. But there are many who believe that the Fed is the best indicator for the stock market, and as long as you have corporate earnings, that’s probably the case.

GOODWIN: I’d say uncertainty is a good argument for a well-diversified portfolio. We’re not just talking about domestic equities, but international markets as well. I’d also consider diversifying away from large-cap stocks, to include mid-cap names. And asset allocation involves looking more at not just equities but also fixed incomes.

BE: What about the international markets?

FRAZIER: We believe our clients should have at least 20% invested internationally in their portfolios.

JACKSON: Well first, I’d point out that a lot of folks don’t realize when they buy U.S. domestic companies, they are really buying a portfolio of global involvement. Eighty percent of Coca Cola’s profits come from overseas. The auto companies have upped their international exposure. With many large-cap names, you get immediate exposure abroad. Interestingly enough, you don’t have to go that far off shore to get global exposure.

WILLIAMS: I wouldn’t recommend an individual investor go out and try to select a specific country or fund to go into, because it can be very difficult. Many overseas companies are just not as efficient or as well run as the U.S. multinationals because of gove
rnment involvement or government ownership. I think you should look at a fund.

BE: Some of our readers have interest in some of the African countries. What about South Africa?

JACKSON: South Africa has basically a first world infrastructure with an emerging markets-type population that is youthful, aggressive,
prepared to be educated and ready to move into the 21st century.

FRAZIER: South Africa is a country that I’m very excited about. I went there in 1994, came back and bought a lot of the Alliance South Africa Fund, which is now posting about a 8% return.

BE: Let’s go through customs and get back to the U.S. What are you looking for this year?

WILLIAMS: I’d avoid consumer finance companies with heavy debt levels. They could be exposed to some risks, particularly if interest rates rise. I’d also be concerned with long distance carriers because there’s a lot of price pressure in that market.

GOODWIN: I agree. The telephone companies are probably going to continue to lag the market this year because a lot of long-distance and local competition issues haven’t been clarified. HMOs and other healthrelated stocks were hit

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