to 50% less, simply because of currency devaluation. That means you are not going to be able to sell as much in foreign markets or at home in the U.S. because of price competition. That phenomenon will hamper U.S. corporate profit growth.
A strong dollar hurts exports, but I think we’ve seen the highest levels of the dollar. If you look at our major trading partners, like Japan, Germany and so forth, the dollar’s value will start to come down and limit any downturn in exports.
TECHNOLOGY STOCKS LOOK CHEAP BUT ASIA IS STILL A CONCERN
Tech stocks headed south the minute Asia’s problems hit the headlines. Our panel says tech stocks will remain volatile this year but could present some tempting bargains to patient investors.
Technology could face some rough going in the first part of the year. But some of these stocks are tremendous opportunities, if you’re a long-term investor looking for good discounted ideas. Technology areas are very volatile, and that’s where you’re going to get the biggest bang; it’s also going to be where you get the biggest disappointments.
No matter what happens this year, we are in a technological revolution. If the sector is hit, I think you’re going to have a lot of opportunities to buy stocks at cheaper prices during the year. I think there are some bargains in the sector that are very cheap and could bounce back quickly once they deliver good earnings in the first quarter.
Tech is one of those sectors in the market that has been unduly punished by psychology. It’s the kind of situation that can provide a good opportunity for investors but often with high risk.
PHARMACEUTICAL AND TELECOMMUNICATIONS STOCKS SHOULD FLOURISH
Finally, we asked our panelists to point out some of the stronger sectors, where you might look for additional stocks in the coming year. Here are some of their suggestions.
Financial stocks have done well, and while I think mergers and acquisitions will continue, bank stocks might have a pause this year. We’ll probably see at least 25% more of the financial firms disappear during continued consolidation. And, regional banks are still good to focus on as a private investor because there is less exposure to global problems in the regional area. Utilities and pharmaceuticals are also sectors that look inviting. Utilities in particular will benefit from lower interest rates.
We like the pharmaceutical stocks, especially those with strong, new product pipelines. One example is Pfizer, which is launching three potentially monster drugs, one for schizophrenia, another for impotence and a third being a new antibiotic.
It’s a surprise to hear a growth manager talk about utilities, but I think telecommunications and electric companies look good, one being WorldCom, which just took over MCI. They’ll be able to work a lot of savings out of the deal, and MCI’s long-distance operations look like they’re about to turn around.
KIM GOODWIN AMERICAN CENTURY GROWTH FUND
Kim Goodwin is up for challenge. Late last year, while helping guide Putnam’s Vista Fund to a 23% total return