For U.S. market, '92 draws to close with a big yawn

NOT THE BEST, NOT THE WORST OF TIMES

January 01, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Wake up, it's over.

With a yawn that characterized the past year, the stock market closed yesterday at 3,301.11, with a relatively small loss of 19.99 points and little excitement. It was a fitting close for a year that was the market's least volatile in the post-war period, with just an 8 percent difference between its 12-month high and low.

"It seems that 1992 was a year when the market was marking time. It was something of a paradoxical year," said William LeFevre, senior vice president of Tucker Anthony Inc.

The paradox lay in the market's stability despite a brightening economy and record funds flowing into stocks from individual investors. While the money helped lead modest rallies, the market has remained within a narrow band and is up less than 5 percent over its close a year ago.

The high for 1992, which was also an all-time high, was set June 2, when the Dow Jones industrial average hit 3413.21. The low for the year was 3136.58, which was set on Oct. 9. The 277-point difference was just 8.8 percent -- far short of the average 29 percent in annual volatility for the post-war period.

Previously, 1979 had been the quietest year, with the high and low separated by 12.7 percent. Typical years, such as 1991, saw stocks swing 26.8 percent, giving traders and investors a chance to make big gains and reflecting the changing fortunes of companies and the economy.

Besides being a snorer for traders, analysts believe the market's torpor showed skepticism about the current recovery and might signal a long-term strategic shift away from stocks that did well in the 1980s and toward others that will do well this decade.

David Resler, chief economist at Nomura Securities International Inc., said one reason for the stability was that the economy performed as unevenly and sluggishly as expected, giving traders little reason to panic or be enthusiastic about the future.

The only driving force, Mr. Resler said, have been cuts in interest rates by the Federal Reserve, which have made other investments less attractive.

Without the cuts, the market might not have increased at all.

Analysts blame the election for some of the disappointment. The market broke with conventional wisdom and did not surge in an election year, with most investors ignoring the possibility of a victory by Bill Clinton during the summer and then selling off in September and October when his lead in the polls held firm.

Mr. LeFevre said the election-year rhetoric also "talked down" the economy, causing investors to be unduly pessimistic about its prospects.

But even since finding Mr. Clinton more acceptable and being showered with encouraging economic reports, traders have hardly become raging bulls. Since it hit its low in October, the market is up just 160 points, or a modest 5 percent.

Michael Sherman, chief economist at Shearson Lehman Brothers Inc., said it has been harder to find good investments in the market because of a feeling that several old reliable stocks, such as International Business Machines Corp., are no longer trustworthy and the good stocks that do exist are so highly priced.

Stability in the Dow also masks fundamental changes in buying patterns, said Paul Lesutis of Brandywine Asset Management Inc. in Wilmington, Del. Stocks that did well during the 1980s, such as drugs and biotech, are being dumped in favor of stocks able to take advantage of an upswing in the business cycle, such as financial services, industrial companies and banks.

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