Morgan Stanley's Byron Wien
Offers Ten Surprises for 2003
By LINGLING WEI
DOW JONES NEWSWIRES
NEW YORK -- Byron Wien, senior investment strategist at Morgan Stanley, predicts that U.S. stocks will defy "the return to-the-mean, modest-return" pundits and likely surge by more than 25% during the first half of the year, among other his guesses for what surprises lie ahead in 2003.
Morgan Stanley, the largest securities firm by market value, publishes Mr. Wien's closley watched "surprise" list at the beginning of each year. Among his correct surprises from the 2002 list that came to pass: No major terror event in the U.S. and oil prices rising above $30. This year, he expects a stronger dollar, strong U.S. gross domestic product growth, no major war in the Middle East and a continuation of the housing bubble
In the report Monday entitled "The 10 Surprises of 2003," Mr. Wien writes that the dollar will draw support from stronger-than-expected earnings growth this year and a recognition of the U.S.'s economic, political and military strength. Mr. Wien envisions a scenario in which "foreign capital inflows surge, and individual investors start to buy again."
On the economy, Mr. Wien expects to see real economic growth of 4% in 2003 as "consumers hold their own and capital spending rebounds." He also expects inflation to move higher and the Federal Reserve to increase interest rates by 1 percentage point in the second half of the year. "The U.S. stock market comes under some valuation pressure in the second half," he writes, "but still closes strongly positive for the year."
The strategist says government legislative relief on the double taxation of dividends will encourage some technology companies -- such as Cisco Systems Inc., Dell Computer Corp., Oracle Corp. and Microsoft Corp. -- "to start making quarterly payouts to shareholders from their huge cash hoards."
Mr. Wien also singles out the biotechnology sector in his report. "This group, which had weak performance in 2002, comes alive," he predicts, as "a number of significant biotechnology products" stand to receive regulatory approval this year. Amgen Inc. and Gilead Sciences Inc. should perform especially well, Mr. Wien says.
The stock market last year turned in its third consecutive year of losses -- something it hadn't done in 61 years. The Dow Jones Industrial Average fell 16.8%, its sharpest decline since 1977. The broad Standard & Poor's 500-stock index fell even more, 23.4% -- its worst year since 1974.
Amid the market misery, investors sought shelter in real-estate investment trusts, office buildings and even in refinancing their own homes, pushing the real-estate market to new heights in 2002. "The housing bubble doesn't burst" in 2003, Mr. Wien predicts, "it grows larger." He expects Lennar Corp. and Centex Corp. to be strong performers in the sector.
Despite growing tensions in Iraq and North Korea, Mr. Wien doesn't see a major military battle in the Middle East or Asia this year, "increasing investor confidence and reducing the risk premiums for equities."
However, oil will likely remain in tight supply in 2003, he says, and crude-oil prices should hover around $30 a barrel. Mr. Wien says oil service stocks -- including Schlumberger Ltd., Halliburton Co. and BJ Services Co. -- could "break out and deliver strong performance" in 2003.
Write to Lingling Wei at lingling.wei@dowjones.com
Updated January 6, 2003 8:31 p.m. EST |
