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Market decline deemed likely Investment firm executives offer their predictions


Top executives of three Baltimore investment companies said yesterday they anticipate a decline in the stock market.

A drop is inevitable because the market, which has been operating at record levels, hasn't corrected by more than 10 percent in the last four years, said James W. Brinkley, president of Legg Mason Wood Walker Inc., at a meeting yesterday with reporters and executives from Legg Mason, Alex. Brown Inc. and T. Rowe Price Associates Inc.

"We know it is going to decline," Mr. Brinkley said. "I think you have to be cautious."

The Dow Jones industrial average, for instance, climbed to a high of 4,816 points this month, up by about 1,000 points since January. And the Nasdaq index closed yesterday at 1,035 points, nearly 300 points higher than its January low.

Another clear sign is that the yield on the Standard & Poor's 500 -- a market indicator -- has fallen while the stocks have generally continued rising, said James S. Riepe, managing director of T. Rowe Price.

"My guess is there will be a correction, and it could be as much as 10 percent, but that is not devastating," he said.

The market is resilient, they said, because inflation and interest rates are low, and corporate earnings remain strong despite efforts to reduce the numbers of workers.

"The positives are there," Mr. Brinkley said. "This is a benign period."

"When I look at the fundamentals, the fundamentals look pretty good," added Mr. Riepe.

Another positive sign is that companies are continuing to go public.

While the backlog of deals in registration has declined in recent years, the companies that are coming to market are being priced above their filing ranges, said Donald R. Heacock, co-head of Alex. Brown's private client division.

"There is still a robust opportunity out there," Mr. Heacock said.

Despite consolidation among financial firms, the executives see

their companies remaining independent for years to come. Mr. Brinkley said Legg Mason could return more to stockholders as an independent even if shareholders were offered a 30 percent premium on their shares.

"We are going to stay independent because there is no strategic reason for us to do otherwise," Mr. Riepe said.

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