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Growth predicted for stock market


The 200th anniversary of the New York Stock Exchange featured a carnival, the release of a 29-cent stamp commemorating the event and the exchange's first television commercials ever. Even former Soviet President Mikhail S. Gorbachev dropped by to pay his respects.

The anniversary gives time for the market to reflect in a record-setting year.

"The bicentennial is a bullish factor, and the public relations surrounding it will draw the attention of more individuals to the market," said Joseph McAlinden, managing director of Dillon Reed. "Unfortunately, publicity may also bring in new investors at the market's top, as is often the case, and might actually exacerbate the topping process."

Stock mutual funds have provided much of the attraction lately for individuals, who remain cautious about investing.

"Wall Street's 200th anniversary is a time to realize the market has changed significantly, dominated by institutions rather than individuals," said Marshall Front, president of Stein Roe & Farnham. In 1965, individuals had an average of 65 percent of their financial assets in the stock market, while last year the percentage was 19 percent. That may be changing this year, Front believes, as stocks and stock mutual funds attract greater amounts of money.

Bicentennial hoopla aside, experts anticipate stability and growth in this year's market. Front sees an up side in the Dow Jones industrial average of 3500 to 3600. McAlinden expects 3600 to 3700 this year, with a bearish 1993 to follow.

"The 1992 stock market could go 10 percent higher or 10 percent lower, and I'm not concerned about the possibility of a major correction," said Michael Sherman, portfolio strategist with Shearson Lehman Brothers.

Despite the Olympia & York real estate debacle, banking is considered strong, benefiting from a wide spread on the cost of funds and huge reserves for non-performing loans. BankAmerica Corp. is suggested by Sherman and Front.

Machinery companies are promising, since they'll likely show gains as restructured companies add more equipment coming out of recession, rather than hire back workers.

Ingersoll-Rand and Caterpillar Inc. are Sherman favorites, while Ford Motor Co., Phelps Dodge and Aluminum Co. of America are McAlinden's choices. General Electric, Minnesota Mining & Manufacturing and the automobile company stocks should all prosper, Front believes.

Technology is due for a comeback. International Business Machines, Hewlett-Packard and Apple Computer are choices Sherman predicts will show strong profits, while Front prefers Microsoft Corp., Sun Microsystems and Intel Corp.

Among growth stocks, Front recommends health care equities hammered into an attractive price range. New products are on the drawing board and earnings growth will be high. His favorites are Pfizer Inc., Johnson & Johnson, Bausch & Lomb, Glaxo Holdings and Merck Inc.

Energy companies, because they're cheap, could offer up-side surprises, said McAlinden, his favorites being Apache Corp., Enserch Corp. and Associated Natural Gas.

Groups likely to underperform are food, tobacco, beverages and drugs, Sherman said. These should be underweighted because they have historically underperformed in economic recovery and a lot of profit growth in the past came from price increases.

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