Newspaper article The Christian Science Monitor

Optimism Reigns for the 1999 Market

Newspaper article The Christian Science Monitor

Optimism Reigns for the 1999 Market

Article excerpt

A year ago, Wall Street economist Arnold Moskowitz predicted the stock market would take a major tumble. Then it would recover, with prices up 20 percent for the year.

So far, he looks like a genius.

Optimists like Mr. Moskowitz are again ascendent among stock- market analysts. There are some pessimists, though. Robert Parks, another Wall Street economist, calls United States stock prices "a megabubble." Interest rate cuts by 11 European nations earlier this month, he says, "come too late to offset the global overinvestment- overcapacity-overleveraging bust, and spreading deflation." But Moskowitz says the Dow Jones Industrial Average will hit 10000 in the spring quarter. That would be a gain of about 11 percent from its present level. In between, there might be a "modest correction" of 3 to 7 percent, he adds. Between Sept. 30, 1993 and Sept. 30, 1998, stocks prices have earned a compound annual return of about 20 percent - a bit more with the recent rise in prices. Such gains aren't all that rare. Since 1926, there have been seven five-year periods that have produced equal results or better. Nonetheless, such returns are "certainly not the norm," notes Tony Vento, an analyst at Edward Jones, a brokerage firm based in St. Louis. Even more unusual is the ratio of stock prices to their earnings, often considered a good measure of the riskiness of stocks. As of last week, the total price of stocks in the Standard & Poor's 500 Index was 27 times their earnings over the past 12 months, reckons Alan Skrainka, chief market strategist for Edward Jones. Moskowitz predicts that ratio will change slightly to 26 for 1999. "Wow! Amazing!" any analyst would have said a few years ago. "That's far above normal." But Mr. Skrainka and Moskowitz can offer explanations for today's high stock prices: 1. Inflation is extremely low. …

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