How To Survive In A Volatile Stock Market

Until the market slowed, a bang-up start to 1998 had investors eager for more. Our experts map out what to expect now.

For investors young and old, experienced or green, it’s head-scratching time. And what’s got us all puzzled comes to this: how can the market keep defying all the rules, and all the pundits and all the experts who say things can’t go much higher?

Talk about a surge of almost mythic proportions. Look at the Standard & Poor’s 500, an index widely used to measure the market’s strength and plot its direction. From 1995 on, it has risen in excess of 20% annually. And this year, having already gained over 18% by the end of July, the S&P 500 seems destined to rocket beyond the ozone. That’s normally the best of news, especially when you take into account that $1,000 invested on January 1, 1995, in a fund that tracks the S&P would now be worth $2,680, a gain of 168%.

So why the jitters? For one, experts have told us year after year that there’s a point when the market must finally take a breather. The pundits still maintain that stocks are the financial place to be: an average yearly gain of over 10% surely makes the market a better wealth-builder than your savings account, and a tidal wave of 401(k) money and investments by private individuals should keep it that way. But, peep a bit closer and the reason to fret becomes clear: stocks have zoomed to highs at a time when company profits, one of the key elements used to gauge how expensive shares should be, are sputtering. At some point, logic tells us, the two are bound to slam into one another and the concussion will bowl over the bull market. In fact, a brief reminder that markets go down as well as up came just a few weeks after our experts met. Stocks took a tumble the first week of August, with the Dow settling some 9% below its high for the year, set in mid-July.

Our last investment roundtable convened July 9, just after the halfway mark this year, to take stock of what’s in store for the market. Our experts included Dail St. Claire Simmons, a principal with Utendahl Capital Management L.P. in New York City, who put a finger on interest rates and the bond market in general. We also invited three stock market experts: Randall Eley, president and chief investment officer of the Edgar Lomax Co., headquartered in Baltimore, joined us to bring a no-nonsense evaluation of market levels and stock values to the table; William Roach, a principal with Globalt Group Inc. in Atlanta, helped shed light on global markets; and Dawna Edwards, vice president and managing director of equity investments with Alpha Capital Management Inc. in Detroit, came with a slew of statistics on corporate earnings.

No matter what camp you belong to-stocks or bonds, growth or income–the text that follows should help clarify what’s likely to take place in the next six to 18 months. We also asked our experts to highlight a few picks that make for good additions to

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