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To: Rarebird who wrote (38215)	8/2/1999 7:07:00 PM
From: Rarebird	Respond to of 116764

Ms. Polyanna's Market Forecast: NEW YORK, Aug 2 (Reuters) - Goldman Sachs market strategist Abby Joseph Cohen said on Monday the stock market may see more modest gains in the near future after a strong wave of buying has lifted stock prices to fair levels, based on their bottom lines. "The Standard & Poor's 500 Index has reached fair value territory, suggesting that future price gains will likely occur in a more moderate fashion," Cohen said in a research note. "We expect the staircase pattern to reassert itself, in which sharp price gains are followed by a trading range." Cohen, one of Wall Street's most respected stock forecasters, made the comments to Goldman clients last week, the bank said, as part of its World Investment Strategy Highlights (WISH) summarized and published on Monday. She said sharp price gains in stocks have been based on strong profits, "muted" inflation and growing confidence in what she termed the "durability of economic expansion". The S&P 500 Index, which Cohen monitors closely, is up eight percent in 1999. For the same period, the Dow Jones industrial average has gained more than 1,000 points, adding nearly 16 percent despite the past two weeks' solid losses. Cohen said non-U.S. stocks could benefit if the trend toward higher-risk stocks like small-caps and cyclicals remains intact. The recent surge in cyclicals is cited as one reason behind the Dow's outperformance of the broad S&P500 index. She said the market's recent rally looks much like a period of strength in 1997, which led to gains in non-U.S. issues before the currency and banking crises in Asia brought the rally to an abrupt halt. She based her comparison on productivity, gross domestic product, inflation and profit trends. In 1999, she said, conditions that would predict a bear market do not seem to be in place. "Previous bear markets were generally preceded by noteworthy overvaluation and catalyzed by deterioration in economic performance, such as a significant rise in inflation or weakness in corporate results. We don't believe that either condition is in place," she said in the note. She downplayed the threat of higher interest rates, which have been weighing on stock prices recently, saying the long end of the bond market may have already discounted a tightening when the Fed's policy arm meets later this month. Any rate hike, she said, should be seen "as a reversal of actions taken in 1998 during a time of global distress, rather than a major salvo against (still quiescent) domestic inflation." "It may well be that the U.S. bond yields have already experienced much of their excitement for the year," she said.