Newspaper article THE JOURNAL RECORD

Looking to New Year Sobers Wall Street Analysts

Newspaper article THE JOURNAL RECORD

Looking to New Year Sobers Wall Street Analysts

Article excerpt

Considering that the stock market is near record highs and the economy is looking better all the time, Wall Street analysts are remarkably somber as they look ahead to 1993.

No matter how healthy stocks seem at the moment, many forecasters argue that the market is vulnerable to a setback.

Any decline could be intensified, they warn, if the present "honeymoon" President-elect Bill Clinton is enjoying among investors is followed by a letdown.

"Play our holiday rally, but brace for post-holiday blues," advised Greg Smith at Prudential Bache Securities.

"Much of the `smart money' big names in the industry are turning bearish," said Ed Walczak, chief investment officer at Vontobel U.S.A. in New York.

"The market has had quite a run-up in short order," Walczak added. "After this rally, we must confess that we're having a harder time finding good companies in good businesses at reasonable prices."

This sort of killjoy mood was evident in the market late last week, when the government issued economic reports showing improved employment conditions with no revival in inflationary pressures _ and yet stock prices lost ground.

Evidently, investors were paying a lot of attention to the cautionary words of observers like Robert J. Farrell, chief market analyst at Merrill Lynch.

"The first year of President-elect Clinton's four-year term is likely to pose some difficulty for the stock market," Farrell said. "Economic problems are not likely to be solved quickly, and high expectations for change may not be realized.

"Historically," he noted, "the first year of presidential terms has shown the lowest returns from stocks. This has been particularly true when stocks have done well in the last two years of the prior presidential term, as was the case in 1991-1992.

"The two-year bull market is maturing and appears to have gotten past the point of maximum benefit from falling interest rates. …

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