Industry Observers Have Positive '99 Outlook For Markets
By Desiree J. Hanford
12/17/98
Dow Jones News Service
ST. LOUIS (Dow Jones)--Although the economy is showing signs of slowing next year, the outlook for financial markets is positive, several industry observers said Thursday.
John W. Zimmerman, senior vice president and senior investment strategist at NationsBank Private Investments and one of the panelists at a St. Louis Society of Financial Analysts meeting, said several factors make him optimistic about the coming year. Those factors include a worldwide spreading of capitalism, globalization, and the technological revolution.
Peering into next year, Zimmerman estimated that the Dow Jones Industrial Average will increase to 9600. He expects that the real gross domestic product will decrease to 2.5% from 3.7%, and that national GDP will slide to 4.5% from 4.8%. He also saw the consumer price index increasing to 2% from 1.6%.
Some of the risks for the financial markets that Zimmerman sees next year include continued problems in Japan, the devaluation of some Latin American currencies, and U.S. political uncertainty.
Looking at 2000 and beyond, Zimmerman sees several trends that will benefit certain industries. For example, an aging U.S. population is good news for financial, pharmaceutical, health-care, biotechology and education stocks.
David Rolfe, chief investment officer for Wedgewood Partners, a small investment shop in suburban St. Louis, said he also saw inflation and interest rates remaining ideal into next year.
Rolfe said investors can take advantage of both the macroeconomic forecast by the industry, and some microeconomic themes he sees occurring in 1999. Two of those themes are the quickly growing area of information technology and the huge number of Baby Boomers turning older.
Rolfe said advances in information technology will be driven by semiconductors and networked computers. Some of the companies he likes in those areas are Ascend Communications Inc. (ASND), Applied Materials Inc. (AMAT), Intel Corp. (INTC), Linear Technology Corp. (LLTC), Parametric Technology Corp. (PMTC), and MCI WorldCom Inc. (WCOM).
Sectors Rolfe expects to benefit from Baby Boomers getting older include financial services, health care and recreation. Some of his favorite companies in these areas are Amgen Inc. (AMGN), Merck & Co. Inc. (MRK), Harley-Davidson Inc. (HDI), Mirage Resorts Inc. (MIR), Fannie Mae (FNM), Charles Schwab Corp. (SCH), Wells Fargo & Co. (WFC), and Berkshire Hathaway Inc. (BRKA).
Rolfe said investors should simplify their portfolios and not fill them with too many companies.
"I recommend that we make fewer, but hopefully better, decisions, own fewer stocks in our portfolios, trade less, and truly take a long-term view of investing," he said. "The golden age of the buy-and-hold investor is very much intact."
John Bartlett, vice president and senior portfolio manager at Commerce Bank, said he expects bonds to return between 5% and 6% next year, and for stocks to have returns in the high single digits
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