-- =SMARTMONEY.COM: When Will The Losing Streak End? --
By Stacey L. Bradford
January 2, 2003
2002 WAS A LOUSY year for stocks. It was also a terrible year for the Wall
Street superstars who are paid vast sums of money to tell the rest of us what
the stock market will do in the future.
For some, punishment took the form of public humiliation. For example, Goldman
Sachs uber bull Abby Joseph Cohen once again promised us a better, more
profitable year in 2002 - and once again, she got it dead wrong. Other so-called
experts suffered far more than tarnished reputations. Lehman Brothers waved
bye-bye to chief equity strategist Jeffrey Applegate, while Credit Suisse First
Boston kicked chief strategist Tom Galvin to the curb. These promulgators of the
best-case scenario no longer grace our Pundit Watch column.
But 2002 wasn't uniformly grim in Pundit land. Pimco's Bill Gross repeatedly
warned investors that stocks were greatly overvalued based on real earnings, and
predicted that equities would continue to fall. Merrill Lynch's Richard
Bernstein cautioned that technology and telecom stocks in particular remained
overvalued. Salomon Smith Barney's Tobias Levkovich said the mighty American
consumer would keep on spending. Right, right, right.
So what do our savviest pundits see for the coming year? More of the same,
unfortunately. Merrill's Bernstein, along with Levkovich and SG Cowen's Charles
Pradilla, say investors should brace themselves for more volatility and
trendless trading ranges. Bernstein expects the Dow Jones Industrial Average to
hit a high of 9000 and a low of 7000, and predicts it will finish the year at
8250 - below where it began. The outlook is worse for the Nasdaq, which he says
will close 2003 at 1000 after reaching a high of 1500 and a low of 900. These
are ranges Bernstein provided for Louis Rukeyser's annual panelist competition.)
One of our newer gurus, Morgan Stanley's Steve Galbraith, says it's time to
reevaluate his portfolio. In a 180-degree shift from two years ago, he now
favors growth-oriented and large-cap stocks over value-oriented and small-cap
issues. He also believes Treasury bonds will sell off, and that the initial
backup in yields could prove positive for stocks as it lends confidence that the
double dip threat of recession is receding.
Of course, if the U.S. attacks Iraq, all bets are off, warns UBS Warburg's Ed
Kerschner. The attack itself may have only a mild direct impact on the economy,
he says - but it could derail the already fragile recovery scenario that his
firm has predicted. How? If the U.S. goes to war, corporations and consumers
could rein in their spending. And tied purse strings would imperil Kerschner's
forecast of 5% to 10% growth in S&P 500 earnings. Without earnings growth, the
likelihood of the S&P 500 index rising substantially would diminish greatly.
If this kind of thinking has you down, you might consider some of those
best-case-scenario forecasts. In October, Cohen trimmed her 12-to-18-month price
targets for the S&P 500 to 1150 from 1300 and the DJIA to 10,800 from 11,300.
Why's that a good thing? Those reduced numbers would still represent a 30% rise
from current levels. Prudential's Ed Yardeni comes in just a tad lower, calling
for an S&P 500 of 1100.
Gains like those sound wildly unrealistic to most of us. Unless, of course,
you consider how far the S&P has fallen over the past three years. Against that
bleak backdrop, a 30% gain can hardly be called a recovery.
For more information and analysis of companies and mutual funds, visit
SmartMoney.com at smartmoney.com.
(END) Dow Jones Newswires
01-02-03 1830ET- - 06 30 PM EST 01-02-03
02-Jan-2003 23:30:00 GMT
Source DJ - Dow Jones |
