POLL-Wall St in for bridled bull run in 2000
NEW YORK, Dec 16 (Reuters) - Wall Street's bull run will continue into 2000, but will not be as wildly unbridled as this year, according to market strategists.
They expect technology shares to lead stocks higher again but only after a possible retreat in the technology-oriented Nasdaq market.
In a Reuters poll, strategists saw the broad-based Standard & Poor's 500 Index (^SPX - news) at 1,575 points at the end of next year, according to the median of nine forecasts. That's a relatively modest 11.5 percent rise on present levels.
For the Dow Jones Industrial Average (^DJI - news) they forecast a 13 percent rise through to the end of next year to 12,725. But in the poll, taken late last week, few risked a forecast for this year's stellar performer, the Nasdaq composite (^IXIC - news).
Next year is likely to resemble 1999 with ''New Economy'' companies, which blend technology, communications, information and entertainment, continuing to draw investor funds.
Peter Canelo, Morgan Stanley Dean Witter U.S. equity strategist, expects a 12 percent rise in the S&P 500 next year, and a similar gain in corporate earnings. He sees the yield on the long bond at no more than 6.5 percent, while inflation stays below three percent.
PRODUCTIVITY EXPANSION
''Underlying these assumptions is the confidence that the vibrant productivity expansion of the past four years will continue in 2000 and beyond,'' he said in his outlook for 2000.
"That conclusion is well supported by the explosive demand for information technology, the increasing acceptance of the Internet, especially for business-to-business transactions, and the advent of broadband telecommunications.
''These trends should increase business efficiency, reduce distribution costs, and help keep a lid on prices, all enhancing productivity.''
Canelo's favoured sectors for 2000 are retailers, energy and cyclicals, technology and financials. His least favourite are utilities, consumer staples and telecoms.
So far in 1999, the S&P 500 has climbed just over 14 percent, the Dow Jones Industrial average more than 21 percent and the Nasdaq composite an astounding 62 percent.
''Our forecast for 2000 is that the unprecedented continues to happen,'' Jeffrey Applegate, chief investment strategist at Lehman Brothers writes in his U.S. strategy forecast for 2000.
Lehman's model U.S. portfolio for 2000 is 80 percent stocks, 10 percent bonds and 10 percent in cash. It expects continued narrow leadership in the stock market and keeps its portfolio tilted toward large capitalisation and global growth stocks.
Richard Babson, chairman of Babson-United Investment Advisors Inc., said: ''We're looking for continued (U.S.) economic robustness next year.'' The U.S. economy could in February reach the longest period of expansion ever.
Standard & Poor's, keeper of the widely-watched S&P 500, is looking for its broad market measure to rise 13 percent next year, to end at 1,600. Industries identified as holding the greatest potential in 2000 are broadcasting, technology, health care, banks, semiconductor chip makers and telecommunications.
Seven of the 10 best-performing S&P industry groups for 1999 are technology and telecom-related. ''The new breed of investor, unburdened by historical baggage, is flocking to these groups,'' Standard & Poor's reports in its ''2000 Annual Forecast.''
BABY BOOM DOLLARS ABOUND
Edward Kerschner, PaineWebber's chief investment strategist, said cash flows into equities will continue for 10-15 years, citing the impact of the generation born after World War Two that is increasingly focused on growing retirement assets.
''The share of household assets in stocks historically has fairly closely followed the share of population aged 45 to 54. This segment of the population should reach a peak of 18.7 percent in 2007, and then stay close to that level for the next five years,'' Kerschner said in a report. By year-end 2000, he sees the S&P 500 at 1,600, and the Dow at 12,500.
Many analysts sees prices on the Nasdaq market ending their rapid climb and heading lower in 2000 before any drive higher.
Arnold Berman, technology strategist at SoundView Technology Group, said technology stocks will continue to do well but likely fall short of the 1999 performance of 1999. The Nasdaq could be due for a correction early next year, he said.
Tech companies poised to outperform, he said, are e-commerce firms and all types of communications companies including satellite, cable, wireless and Internet service providers.
Ricky Harrington, technical analyst and senior vice president at Wachovia Securities in Charlotte. N.C. said Nasdaq was due for a drop of as much as 50 percent by February. ''People are buying stocks for the wrong reasons. They're buying then simply because they are going up, not because (the companies) are making money on the fundamentals,'' Harrington said.
But the technology craze should slow. ''We will settle back because the good news about technology and new paradigms will be built in,'' said Primark Decision Economic's senior economist, Pierre Ellis, who saw the S&P 500 to end-year 2000 at 1,575.
Several firms predict the Federal Reserve will raise interest rates at least once in 2000 and that could yoke stocks.
''There are at least two more Fed rate hikes, which works against liquidity in a liquidity-driven market,'' said Gail Dudack, Warburg Dillon Read's chief investment strategist. She expects the Dow to end 2000 at 10,000, the S&P 500 at 1,300 and Nasdaq at 2,700.
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