Brokerage firms may be cutting employees, and stock prices may be in the doldrums, but not everyone is pessimistic.
Shearson Lehman analyst Elaine Garzarelli, who gained fame by predicting the crash of 1987, spoke yesterday in Baltimore at the Center Club to several dozen investment managers, and her message was decidedly upbeat.
"I think we are in the bottoming phase of a bear market," she said. "Right now I can see a Dow [Jones industrial average] of 2,800 by the end of next year. I can't see more than that, but that's enough."
As of yesterday's market close, the Dow stood at 2,443.81.
Her lowest forecast is for a Dow of 2,200, but she said, "I don't vTC think we will see it. You have to assume nothing will work to be bearish."
Ms. Garzarelli categorized any dip in the Dow below 2,400 as "a gift" for investors.
She said that underlying her forecast is a belief that the economy is in a mild recession that began in July and will continue for about 11 months. Earnings comparisons will be at their worst this quarter, and the gross national product may show a decline of 3 percent to 5 percent during this period and then indicate a more shallow contraction during the first half of 1991, before turning strongly positive.
Because the stock market usually begins to move up three to eight months before the end of a recession, it might begin to rally soon, she said.
Among the most promising areas are those that have been most bloodied in recent months, including companies involved with entertainment, newspapers, department stores and restaurants, Ms. Garzarelli said.
Tobacco and drug companies, which have held up better, also look good, she said, and the bleakest outlook is for some of the groups that have done best of all recently, such as electric utilities and food companies.
She said external events could still subvert her outlook but asked rhetorically, "What could go wrong? The world could collapse. But what sort of chance is there of that?"