Jim Hodges and Richard Cripps look at the stock market very differently -- remarkably so, considering they work for the same brokerage firm.
Mr. Hodges said clients of the Towson office of Legg Mason Inc. are snapping up blue-chip corporate bonds, confident that interest rates have passed their peak, and that business at the brokerage office he manages jumped between 10 percent and 15 percent from December to January. "That's nice," he said.
But back at the firm's downtown offices, Mr. Cripps said he's rarely seen investor confidence surveys so bearish at a time stocks were so high. It's too good to last, Legg Mason's head of equity marketing worries; as the economy slows later in the year, he thinks corporate earnings are bound to disappoint and the market is bound to take its revenge.
Who's right?
"That's what makes a market," Mr. Hodges said with a laugh.
Indeed, that same split between optimists and skeptics marked the entire stock market this week. The Dow Jones industrial average cruised past 4,000 for the first time, interest rates were edging lower, and small investors put $132 million into stock mutual funds in the week ended Wednesday -- even as strategists at big investment banks disagreed over how long the good times could keep rolling.
Baltimore investment companies are sharing in the market's gains, and in its wariness. After a strong start to 1994 that ended in tougher times with rising interest rates, they are taking this year's early gains with a little skepticism.
"I think people here think we are in for a real good year in the market," said Steven Norwitz, a spokesman for T. Rowe Price Associates Inc., a Baltimore-based mutual fund company.
Mr. Norwitz said investors have added $500 million to Price's stock funds in this year's seven weeks, as interest in U.S. stocks has risen.
That should help Price boost its profits this year, Mr. Norwitz said, even though investors added $1.5 billion to Price's stock funds the first seven weeks of last year.
"It pales in comparison to [early] last year," Mr. Norwitz said.
Last year's early gains were not enough to assure a yearlong boom, however: Price ended up posting record 1994 profits, but posted much smaller quarterly gains in the second half of the year than the first half.
The same guarded attitude is evident at Alex. Brown Inc., the biggest investment bank in Maryland and the nation's oldest. The firm has underwritten about the same number of stock offerings this year as in early 1994, including this week's initial offering for Baltimore-based HCIA Inc.
But Michael T. Ott, a principal in the firm's capital markets desk, said there were still signs that the new issue market was not yet confident.
"The number of transactions that are on file [awaiting federal approval] this year as opposed to last year is down significantly," he said.
Alex. Brown chief executive A. B. Krongard dismissed the significance of the Dow Jones average milestone, saying through a spokeswoman that "it's business as usual at Alex. Brown."
But the stronger market is making for stronger business -- at least for now -- at small firms as well as big players like Alex. Brown.
R. Bentley Offutt, president of Offutt Securities Inc. in Hunt Valley, said his small firm, which advises mutual fund managers about stocks of small and midsized manufacturing companies along the East Coast, has benefited indirectly from the flow of money into mutual funds.
"The midcap value stocks are very much in vogue right now," said Mr. Offutt, who estimated that his firm's revenue was up 10 percent this year. "A number of these companies are well-followed by Wall Street" and that creates an opportunity for small securities firms that are able to track smaller, more obscure stocks, he said.
But the market's upward move -- after a 1994 that brought a stagnant Dow Jones and erosion in broader stock and bond markets -- is still so new and novel that even skeptics like Mr. Cripps aren't ready to cast their opinions in stone.
He said surveys of investor sentiment are most likely to be wrong when they point strongly one way or the other. "It probably means the market has more to go on the upside."