| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
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| WHERE TO INVEST -- STRATEGIES FOR STOCKS
Nasdaq, Shmasdaq. Two Out of Three Ain't Bad Thanks to the Nasdaq Composite Index's meteoric 65% rise, none of the gurus BUSINESS WEEK polled last year came close to pegging all three of the major stock indexes. But two were on the money when it came to divining where the Dow Jones industrial average and the Standard & Poor's 500-stock index would end the year. As of Dec. 10, BUSINESS WEEK's cutoff date for declaring a winner, Philip J. Orlando, chief investment officer at Value Line Asset Management, was a mere 1.2% shy of the S&P's 1417 close. On the Dow, the prize went to Thomas M. Galvin of Donaldson, Lufkin & Jenrette, whose forecast of 11,000 fell only 2% short. Galvin missed the S&P by 8.25%, while Orlando undershot the Dow by 6.45%. ''HIGH OCTANE.'' The analyst with the highest expectations for the Nasdaq, Laszlo Birinyi Jr. of Deutsche Bank Securities, wasn't bullish enough to anticipate the index's huge gains. In fact, his prediction was 22.65% too low. Still, Birinyi correctly reasoned that tech would continue to account for a bigger share of the overall economy--a trend most reflected in the tech-heavy Nasdaq. Uniting the winners was a contrarian's view that the U.S. economy--and investors' appetite for stocks--would remain strong while inflation would be quiescent. ''Low single-digit inflation and double-digit profit gains,'' says Galvin, ''are high-octane fuel for equity valuations.'' Most strategists were looking for a slowing economy. So how about next year? Both Galvin and Orlando expect 2000 to read much like 1999's sequel, thanks to continued low inflation and the likelihood that an overseas recovery can sustain healthy corporate earnings growth, even if the U.S. economy slows. Both look for a ''millennium rally''--fueled in part by relief over a lack of Y2K troubles--to power stocks to new highs in early 2000. As a result, by yearend both gurus think the S&P should be up some 20%, to about 1700, while the Dow will rise 15%, to about 13,000 (table, page 123). When it comes to the unpredictable Nasdaq, though, Orlando concedes: ''My forecasting ability is already proving to be inaccurate.'' Indeed, at 3620, the index is flirting with his target of 3800 for the end of next year. But if 2000 mirrors 1999, Orlando won't be alone: Even the biggest bulls will get caught short. By Anne Tergesen _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Will the Bull Outrun Predictions Again? TABLE: Business Week Market Forecast Survey for 2000 (.pdf) Nasdaq, Shmasdaq. Two Out of Three Ain't Bad INTERACT E-Mail to Business Week Online | |||
