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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (2333)	10/18/2000 12:45:36 AM
From: 16yearcycle	Read Replies (1) \| Respond to of 57684

Tuesday October 17, 8:08 pm Eastern Time CSFB's Galvin sees 2001 inflation low, strong market DENVER, Oct 17 (Reuters) - Inflation is likely to stay under control next year as long as big name retailers, including Home Depot (NYSE:HD - news) and Wal-Mart Stores Inc. (NYSE:WMT - news), keep cutting prices to maintain market share, Thomas Galvin, chief investment officer for Credit Suisse FirstBoston, said on Tuesday. And that would be good news for the stock market, according to Galvin, who addressed a luncheon here sponsored by Denver Investment Advisors LLC and Westcore Funds. Despite Tuesday's steep drop in stock prices -- the Dow Jones Industrials fell 149 points to end at 10,089 -- Galvin, who was chief investment strategist for Donaldson, Lufkin & Jenrette before it was acquired by CSFB, is an unabashed bull. He expects U.S. gross domestic product growth this year to be at five percent and 4 percent next year, with inflation remaining below 3 percent. He also sees the Dow hitting 12,650 in 2001. GDP grew at 5.6 percent in the second quarter. Galvin noted that interest rate hikes have cut retail spending and have debunked the theory that consumers were feeling so wealthy because of their strong portfolios that they were immune to rate hikes. ``As we can clearly see today, whether it's home building or autos or any pocket of retail, interest rates and money supply do matter ... the growth of the economy is probably almost half as fast today as it was six months ago,'' Galvin said. He argued that ironic as it may seem, stock prices do better when profits falter. ``Historically when you've had better than 15 percent earnings growth, you've had only about 11 percent growth returns in stocks,'' he said. But when the S&P 500 earnings per share are less than 5 percent, the total return has been about 20 percent over the past 40 years, he said. He also said he did not believe price earnings ratios were too high, saying they were about even with 1994. Galvin said he expects the technology industry to continue growing as more and more companies still need to upgrade. ``I think technology, which is roughly at one-third of the S&P -- I think it can grow to 40 to 45 percent of the S&P by 2005,'' he said, adding that in five years businesses should not be scrambling to get more power in desktop computers and telecommunications companies should have put in place sufficient bandwidth to take care of such needs. After technology needs are met, Galvin expects attention to focus on health care between 2005 and 2010 as the population ages and needs more health care services.