Bullheaded: Some Analysts Still Upbeat

WEEK BEHIND/WEEK AHEAD

Don't panic over stock market dips, says Arnold Moskowitz.

"This year I have an upside target of 8000 to 8200" for the Dow Jones industrial average.

Mr. Moskowitz, a market consultant based in Palm Beach, Fla., belongs to a shrinking group of stock market bulls.

The market, he holds, is not suffering from "irrational exuberance," as Federal Reserve chairman Alan Greenspan warns.

Like other bulls - those expecting stock prices to rise further - Moskowitz doesn't rule out a modest "correction" of 5 to 7 percent "along the way."

Investors knocked 160 points off the Dow Thursday, after a report of robust retail sales for February.

And many suspect Fed policymakers will tap interest rates higher on March 25.

Moskowitz remains unshaken.

Nor did the drop shake the optimism of Ralph Acampora (the Dow will reach "8250 this year") or Peggy Farley ("7500 to 8000").

Here are their reasons:

*Solid fundamentals. Mr. Acampora, head market technician for Prudential Securities Inc., New York, points to low inflation and interest rates, just as in the 1962-64 extended bull market.

Moskowitz adds to these slow income growth, job-restructuring, low-cost labor pools for US multinationals, and technological advances that boost productivity and lower labor costs.

*Good stock prices. "The US market is ... undervalued by many of our measures," says Moskowitz. He calculates the price-to-earnings ratio (P/E) of stocks in the Standard & Poor's 500 (S&P 500) at 17.5.

That means average stock prices are 17.5 times greater than average earnings per share for companies on the S&P 500.

The P/E ratio has typically peaked at 18 to 22 in earlier bull markets, Moskowitz notes. It was 22 in 1991. So there is room for higher prices, he says.

*Money inflows. Acampora points to the huge sums baby boomers are pouring into stocks, often through mutual funds. Foreigners are also big investors on Wall Street.

But Moskowitz cautions that the $18 billion to $22 billion going into mutual funds each month are "small potatoes" compared with the $3.5 trillion already invested there or $9 trillion in overall stock market assets.

He figures it would take $1 trillion to $2 trillion of outflows "before a significant crack in the equity market appear.

*Stock volatility down. Stocks are safer than bonds, Moskowitz maintains. One measure of stock price volatility shows a decline from 25 percent in 1955 to 15 percent in 1996.

*Contrarian thinking. "This correction is very healthy," says Ms. Farley, managing director of AMAS Securities Inc., New York. "Markets tend to overreact."

Not persuaded?

Then try the views of Wall Street economist Robert Parks.

Stocks, he says, are "wildly overpriced."

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