BOSTON — The booming United States stock market will keep booming for at least another 18 months, says Ralph Acampora, director of technical research for Prudential Securities in New York. He sees the Dow Jones industrial average reaching 6,500 to 7,000 by the first quarter of 1998. It closed Friday at 5,649.45.
In recent weeks, he says, the market has been adjusting to slightly higher interest rates and a falling bond market. But he sees the "pause" as temporary, adding: "Slightly rising rates will not end the bull market, and stocks should de-link from bonds."
In an interview, Mr. Acampora explains his position as a rampaging bull. It is a minority view on Wall Street, he admits.
But then, he was in the "minority" back in June 1995 in arguing that US stocks had entered a long-term bull market.
The Dow was around 4,500 then, having already made a steep climb from a trough in late 1994 after what he views as a bear market. Skeptics in mid-1995 doubted that stocks would see much further growth.
The Dow went on to add another 1,100 points, "and it isn't over yet," he insists.
Acampora says he's a student of the market's history, not just an optimist. To illustrate his point, he tells of Ken Ward, a technical analyst with Hayden Stone & Co. An analyst during the 1929 crash, Mr. Ward was still working in 1971 when Acampora asked him, "What was the most difficult period on Wall Street for a practicing technician?"
Ward replied: "You'd think it was the 1929 crash, but it wasn't. If one had planned, he could have survived 1929. The hardest time to analyze was between the market low in 1962 and the high in early 1966."
"Ken, the market went up then!" Acampora replied.
Ward said: "Yes, up and up ... and no one knew why."
Early last year, Acampora remembered this conversation. He wanted to think beyond the technical confines of his profession. So he went to the New York Public Library for six weeks and read every issue of the Wall Street Journal, on microfilm, from mid-1962 to early 1966, "to see what people were thinking and saying back then."
They were surprised as the market kept going up, Acampora says. Reading the data and comments "made me feel that we are in a very similar period right now."
The basic similarities he sees in the two periods are a modestly growing economy, low inflation, low interest rates, increasing corporate profits, a rally led first by blue chips and then by smaller companies, some quick, sharp drops along the way, a pause to adjust for increasing interest rates, then a last great spurt before speculation kills the bull - "as it always does." These parallels so far are uncanny, he says. Although there are signs of some speculation now, the market is still being led by solid gains by solid companies. "We are still in the bull."
"Quantitatively oriented people today point to high price-earnings ratios and low dividends," he says. "But their comparisons only go back to the 1970s." In the early to mid 1960s, "P-E ratios were much, much higher" than today - often 23 compared with 17 now.
The business story today, he adds, is "the power of money." He means the flow "for the next 15 years" of baby-boomer savings into mutual funds - and also mutual-fund money buying initial public offerings of stock. These IPOs show "people feel good about America in the world today."
He also sees lots of foreign money going into US stocks this year and next, riding a healthier dollar and the great "earning power of the competitive US economy."
News reports over the past two weeks have speculated that the market is nearing a high and will cool off. Acampora sees only a pause before higher ground.