Market Analysts Overshoot Outlooks For Dow Industrials, Nasdaq in 2000
By CHERYL WINOKUR MUNK and LYNN COWAN
Dow Jones Newswires
NEW YORK -- Had some of Wall Street's market strategists tried to predict the weather in 2000, they would've been rained on.
Few came close to their predictions made last December on how the Dow Jones Industrial Average would fare in 2000. In fact, many missed by a long shot.
How bad was it? Last December, Goldman Sachs Group strategist Abby Joseph Cohen saw the Dow Jones Industrial Average hitting 12300; Prudential Securities' Ralph Acampora predicted 12500; Credit Suisse First Boston's Tom Galvin -- who was with Donaldson Lufkin & Jenrette at the time -- forecast 13000, and Morgan Stanley Dean Witter's Peter Canelo predicted 12000.
So far, the index's closing peak was 11722.98, and that was on Jan. 14. It closed Wednesday at 10629.11. It's off 7.55% for the year, while the Nasdaq Composite Index is off 33.48%, and the Standard & Poor's 500 Index is down 8.67%.
Of course, strategists weren't completely wrong on everything. Mr. Acampora called 5000 for the Nasdaq composite index, a peak it surpassed on March 10 -- before falling to the current level of 2706.93. Ms. Cohen saw the S&P 500 Index hitting 1525, and indeed it did, even beating it on March 24 -- before trailing to its close of 1341.91 Wednesday.
Market strategists admit they failed to foresee the severe rout in technology stocks that occurred this year, but say their job is, indeed, like forecasting the weather -- the farther out the prediction goes, the less accurate it can be.
"I don't think it was that clear early on," Mr. Acampora said. "In the middle of the year, we knew the techies were in trouble. But even as negative as it was mid-year, we thought there'd be a bit of a bounce."
Ms. Cohen, who cautions in research notes that her index predictions "make no presumption of precision" but indicate the general pricing trends she sees, didn't return phone calls seeking comment.
A.G. Edwards & Sons' Al Goldman, who projected last December that the Dow Industrials would reach 13000, Nasdaq would hit 4300 and the S&P 1700 during 2000, said he and others underestimated what would occur in the markets.
"The market always goes to extremes of greed and fear. We all underestimated the extremes... it's human nature," Mr. Goldman said.
On Nov. 20, Jeffrey Applegate, Lehman Brothers' chief U.S. investment strategist, admitted his mistakes in a report headlined "Mea Culpa" because he's been bullish all year and the market is down.
"Into March, that looked okay; since then, it's looked awfully stupid," he said.
Nonetheless, he generally remains bullish. His 2000 outlook for the S&P 500 was and still is 1600. He has a target of 1800 for 2001. He doesn't forecast the other indices.
Joseph Battipaglia, chairman of investment policy at Gruntal & Co., also remains bullish. He's expecting the DJIA to be at 12500 at year-end, the Nasdaq to be at 4300 -- an increase he made last week -- and the S&P 500 to hit 1625.
In his weekly perspective, Mr. Battipaglia was upbeat about the Nasdaq's prospects. He said he expects to see strong demand, rising order backlogs and higher equity prices for telecommunications, wireless and fiber optics equipment companies. "Investors should therefore remain overweighted in these areas," he wrote.
Meanwhile, this year, some are moving more cautiously with their 2001 predictions. Mr. Goldman of A.G. Edwards says he isn't predicting hard numbers until the market looks clearer. Instead, he believes the Dow will rise 10%, the S&P 500 will rise 12% and the Nasdaq will go up 20% from their levels on Jan. 2, 2001 -- whatever those levels may turn out to be.
"I don't have any specific figures. Until the market turns around, that is donkey dust," Mr. Goldman said, adding that he thinks the averages will go up at the same rate as corporate earnings.
A number of other firms, including Morgan Stanley, Salomon Smith Barney, Gruntal and Prudential Securities said they haven't finalized their 2001 estimates.
Meanwhile, Ed Yardeni, chief investment strategist at Deutsche Bank Securities, has a bearish outlook for the rest of this year and a tempered one for next.
His current outlook for the DJIA is 9600 and 11943 for 2001. He expects the Nasdaq to be at 2500 on Dec. 30 and 3000 next year, and the S&P to be at 1178 on Dec. 30, and 1533 next year. |
