Newspaper article The Christian Science Monitor

Markets Abroad Look Strong in '95

Newspaper article The Christian Science Monitor

Markets Abroad Look Strong in '95

Article excerpt

THE bears ruled Wall Street and many of the global markets in 1994. But if the United States can avoid a recession, some analysts predict a more bullish market by late in 1995.

How bearish was '94?

Sixty-five percent of all listed stocks lost value, according to Larry Wachtel, a vice president with investment house Prudential Securities Inc., in New York City.

As of the end of last week, the Dow Jones industrial average had gained about 2 percent in value for the year, compared with a more typical yearly gain of about 15 percent since 1980. And the Standard & Poor's 500 index, which is a broader measurement of stocks than the 30-stock Dow, is actually down about 2 percent for the year.

The bond market hasn't fared much better, Mr. Wachtel says. It was jolted by sell-offs linked to rising interest rates - which eroded the value of existing bonds - and difficulties within the municipal-bond market.

But Wachtel says bond-market concerns are ebbing.

The Orange County, Calif., situation, in which the county was forced into bankruptcy after losses from high-risk investments, "created a climactic selling wave" for financial markets, Wachtel says. But "the {negative} emotions growing out of that incident" have begun to fade.

Once again, this year as last, the markets will focus on the interest-rate puppet master - the Federal Reserve Board.

"A lot of what will happen in 1995 will depend on what {Federal Reserve Chairman} Alan Greenspan does," says Gene Jay Seagle, president of Tactics and Technics, a financial-consulting firm in Weston, Conn.

Some economists worry that the Fed may hit the interest-rate brakes too hard and the US economy will skid into a recessionary heap. Mr. Seagle predicts that the Federal Reserve will slow the economy "just enough to ensure a soft landing."

"Historically," he says, "the last two years of most presidential administrations have been good years for financial markets." Focused on the 1996 elections, both Congress and the White House will undertake a mix of legislative and fiscal measures to ensure steady economic growth, Seagle predicts, despite the political divisions in Washington between a Republican-led Congress and the Democratic White House.

Then, of course, there's the traditional seasonal uptick, fondly dubbed the "Santa Claus Rally."

It starts as bargain hunters move in right after Christmas. …

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