Here's What To Do For The Rest Of The Year
- Alan Lavine and Gail Liberman
So what's in store for stocks, bonds and the economy the rest of the year?
Ian A. MacKinnon, retired founder of Vanguard's Fixed Income Group, looks for economic improvement next year.
"So far the economy has been reluctant to recover," he said. "I think the broad trend is toward improvement. But that improvement is going to take place haltingly and much later in the year than I'd previously thought. Now I'm looking for interest rates to increase sometime in the fourth quarter, or possibly the first quarter of 2004."
Robert Rodriguez, manager of the FPA New Income Fund, Los Angeles, disagrees. He says 10-year U.S. Treasury bond rates could go as high as 5.5 percent over the next 12 to 18 months. Currently the 10-year bond is yielding about 4.3 percent.
So what is he doing? He says he will gradually buy bonds when they hit 5 percent.
Walter S. Frank, chief investment officer at Moneyletter, Holliston, Mass., believes that based on trends, the economy continues to grow. Interest rates will be flat to higher and inflation will be flat. He sees United States and world stock markets going higher.
Over the shorter term, Jeffrey A. Hirsch, editor of the Almanac Investor Newsletter, Old Tappan, N.J., says stocks have been doing well because it is a presidential pre-election year. The stock market is anticipating future economic growth. Be advised it is no sure thing. Stock prices could pull back. "This is not the new bull market to end all bear markets," he says. "It is a post-war/ pre-election year rally."
On the international stock side, David G. Herro, manager of the Oakmark International Fund, says that global stocks should continue to perform well following the three-year bear market.
"We believe international stocks are still cheap," he says. "The opportunities going forward are attractive. The war in the Middle East has ended and the SARS problem seems to be fading. This appears to be giving both consumers and business the confidence needed to help improve the growth rate of the global economy."
Herro, however, sees problems in Europe. The economy is flat and there are pension and budgetary problems. In addition, if U.S. economic growth does not continue, the rest of the world also will have problems.
What about gold and gold mining stocks? Ivan Martchev, editor at TradingFloorPro.com, says the gold sector will remain volatile. In the recent past year, there have been over a dozen sell-offs and rallies. But he still recommends a small position in the metal as an inflation and crisis hedge.
Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).
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