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Strategies & Market Trends : Why the markets will continue higher... -- Ignore unavailable to you. Want to Upgrade?

To: current trend who wrote (556)	1/26/1998 12:56:00 PM
From: current trend	Read Replies (3) \| Respond to of 745

The real excitement for 1998 will be in the NASDAQ and the Russell 2000---- by Joe Battipaglia, Chairman of Investment Policy 1/26/98 We are nearing the end of earnings reports for 1997 and by and large they were in-line or better than expected. While this has been encouraging, the more important issue is what is to come in 1998? On balance, most people are closely guarded as for their outlook this year due to troubles in Asia, the volatility of currencies, and questions regarding the strength of the U.S. economy in 1998. I believe the U.S. economy will surprise everyone with its strength this year, both on the consumer side and corporate spending. Now that the U.S. government has overcome all deficits, I believe it is eager to get on with the business of governing and that tends to lead to more spending. Our view on interest rates is that the federal funds rate will be cut from 5 1/2% to 4 1/2% over the next 12-months. This would give us a properly shaped yield curve and stable interest rates for the foreseeable future predicated on low if not non-existent inflation and the strong U.S. dollar. Personal computer sales were better than expected for the fourth quarter in 1997. The impact of networking computing has helped to spread out demand and increase overall consumption of computer products. I believe technology sales will be quite vibrant in 1998 and help lead the market to higher levels. The news that Compaq (CPQ-Not Rated-$31 3/4) is acquiring Digital Equipment (DEC-Not Rated-$45 7/16) tells us that Compaq agrees with our view that the future is bright for micro processing and advanced technology applications. In our opinion, the consolidation theme will continue as there is a lot of value to be added in the sector and we believe firmly in the tech stocks. The financial stocks are in a very attractive range and are also ripe for further consolidation in 1998. We think the broker-dealers, life insurers, and money mangers are the place to be. In the pharmaceutical industry, we see value in the growth rates of these companies and are not put off by the rising value of the dollar against other currencies. While we expect the Dow to hit 9000 this year, we believe the small cap universe is bound for a significant rebound this year. These stocks are trading at approximately an 18%-20% discount in terms of value to their bigger brethren. Also, as opposed to some of the larger cap names, small caps do not suffer as much from foreign exposure and dollar exchanges. We believe the real excitement for 1998 will be in the NASDAQ and the Russell 2000 and would be broadly diversified in this area. This report is only a summary of research reports published by Gruntal & Co., L.L.C