Interest rates will remain low for most of the 1990s, helping stock investments do better than bonds and much better than certificates of deposit and money market funds, a top investment strategist for PaineWebber Inc. told a Baltimore audience yesterday.
"Cash is really the worst investment today," said Mary Farrell, a PaineWebber strategist who was in town to appear on public television's Wall $treet Week, which is taped in Owings Mills. "We expect the stock market to be a bull market. The market doesn't seem overvalued at these levels, given the economic recovery that's under way."
Ms. Farrell said the Dow Jones industrial average, a key indicator of the stock market's health, could reach 3,300 to 3,500 by next summer. It closed yesterday at 2985.69.
At a lunch for PaineWebber brokers downtown, Ms. Farrell said the recovery from the recession will be fairly weak but that a strong performance by U.S. exporters will help corporate earnings grow faster than the gross national product.
Exports will be strong because economies in less-developed or prosperous countries in Europe and Asia are expected to grow )) faster than the U.S. economy. The strong exports and strong earnings would let investments in corporate stock grow faster than the U.S. economy, she said.
Ms. Farrell said U.S. growth will be slowed by the aging of the baby boomers, who fueled much of the consumer spending and creation of new jobs that helped drive the 1980s economy. "The consumer boom is pretty much behind us," she said.
Echoing the view of most economists, she said the recovery is likely to be weak because the recession wasn't as sharp as other post-World War II downturns.