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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 (607)	2/9/1998 10:14:00 PM
From: current trend	Respond to of 745

The Fed's next move will be to lower the Federal Funds Rate and / or Discount Rate--- by Joe Battipaglia, Chairman of Investment Policy 2/09/98 With the Dow Jones Industrial Average rising over 200 points in the previous week, we are currently a stones throw away from surpassing the previous high of 8259. There was also a new high set in the broader indices such as the S&P 500 (SPX) surpassed 1000 for the first time in its history. The Nasdaq Composite Index (NASDAQ) which is heavily concentrated in technology and financial service stocks also outperformed, up over 4% last week. I believe this trend is indicative of what we could expect from the markets the rest of 1998. In our opinion, analyst will become increasingly optimistic about future quarters and one by one will begin to upwardly revise their earnings outlook. We also believe that small stocks will be another bright spot in 1998 as it becomes increasing clear that they are much less affected by swings in value of currency, as are the bellwether companies. Our belief is these companies will outperform significantly in 1998. Last week the FOMC met and decided not to lower interest rates for the time being. With interest rates at the lower end of the yield (Federal Funds Rate and the Discount Rate) curve still relatively high and inflation apparently benign, we think the Fed's next move will be to lower the Federal Funds Rate and / or Discount Rate). We continue to believe 1998 will be another year of blockbuster mergers and acquisitions that should drive market prices higher and sustain the bull market. We currently have airlines and healthcare companies looking for strategic partners. Also of note is the pending acquisition by Compaq (CPQ-NR-$35) of Digital Computer (DEC-NR-$ 60 3/8) as the trend should continue in the technology industry. We also believe there could be further consolidation in the brokerage and insurance arenas. I believe this will keep the pot stirring for investors and fuel the big cap names going forward. At this juncture, we recommend staying clear of natural resource companies. We do like the oil service companies and expect a very strong rebound form this sector. I believe that from here on out that investors will be surprised by the price levels that are commanded in the United States which bodes extremely well for the market. Last week I had the opportunity to attend some conferences in Florida and it appears that there is even unanimity even amongst the most hesitant bulls on the Street, that the market should be clear sailing for the next six months. If you look at overseas trading this weekend there is no reason to doubt that forecast. This report is only a summary of research reports published by Gruntal & Co., L.L.C CT