How Much Higher?

For the market, 1997 had peaks and valleys. What's to come this year?

Looking at the stock market over the last three years, it’s hard not to feel just a little smug. Since 1995, the Standard & Poor’s 500 has hit the jackpot, returning its investors a whopping 195%. That’s a gain that would have whisked a $1,000 investment up to $1,950. Compare that to a historic average rise of 12% annually and there’s little wonder why so many might feel blessed. But if 1997 was such a good year, why are so many people worried?

That feeling of apprehension may be rooted in some very jarring signals that came at the end of last year. On October 27, “Black Monday” reared its ugly head to knock 7% off the Dow Jones Industrial Average. No sooner had the market rallied from that setback when economic woes started TO knock over Asian economies like a row of dominos. But all wasn’t entirely well on U.S. shores either. Several companies–Oracle and Oxford Health among the most noteworthy–turned in lackluster earnings and promptly saw their shares slaughtered in a sell-off.

Could it be that after a three-year orbit, the market is finally returning to earth? We couldn’t help mulling that over when BLACK ENTERPRISE convened its annual Investment Roundtable on January 15. Ironically taking place this year on Martin Luther King’s birthday (and on a day when the Rev. Jesse Jackson visited New York City to admonish Wall Street for its neglect of the African American community), it was reassuring m sir with four of the best minds in the investment business–all African American–to map out what’s to come for both stocks and bonds in 1998.

C. Kim Goodwin, whose specialty is growth investing, joined us fresh from her move from Putman Investments’ Vista Fund to American Century to head up its Growth Fund. Mark D. Lay, a bond market expert whose money management firm just launched two mutual funds, was also on hand to guide us through the world of fixed income. Eric McKissack, whose Ariel Appreciation Fund finished first among its peers last year, lent his insight from the school of value investing. And to round things off, Peggy Woodford Forbes, founder and head of the institutional money management firm Woodford Gayed Management Inc., brought her expertise in large-cap and growth stocks to the table.

What follows is a summary of the highlights of the gathering, including guidance from our experts to help you plan your investment strategy for the rest of the year. The discussion essentially keyed in on six major points–from interest rate expectations to the impact of foreign markets and currencies on our own. Additionally, panelists supplied their best stock and bond picks for 1998 to boost your portfolio.

LOW INFLATION MAKES FOR LOW RATES
To get a gauge on what’s up for 1998, we tackled the question of interest rates, which can make or break the stock and bond markets. High rates lure money from the stock market while lowering share prices. But low interest rates send investors looking for higher gains to the stock

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