Strong or weak? Market's health is all relative

The Ticker

April 07, 1994|By Julius Westheimer

Settling down after two wild roller-coaster days, stocks edged higher yesterday. The Dow Jones industrial average eked out a gain of 4.32 points to close at 3,679.73, down 298 points from its all-time high.

But let's keep things in perspective. Although the Dow index is off sharply in the last few weeks, consider the fact that the blue-chip indicator stood at 2,310 five years ago this week, and shows a gain of 1,369 points, or 59 percent, since early April 1989.

AND NOW WHERE? "Sit tight and wait for buying opportunities." (Adrian Day's Investment Analyst, a Baltimore-based newsletter) . . . "We are near the end of the correction that normally occurs at this phase of the business cycle. Stocks will remain in a bull market until real inflation actually rises about 5 percent a year." (Business Cycle Monitor) . . . "All we need is solid growth (but not too strong, so the Fed doesn't spoil the party), and very low inflation. A few weeks from now, we should see a fairly good move up in stocks." (Prudential Securities Strategy Weekly) . . . "The Fed's tightening has increased risk. The heavy supply of stock offerings combined with waning speculation in mutual funds are long-term negatives. The long-term risk in the stock market is high." (The Zweig Forecast) . . . "I have said for some time that the major financial surprise of 1993-94 would be a major rise in interest rates; my view continues that rates will rise much ,, farther than generally believed." (LaLoggia's Special Situation Report.)

BALANCING ACT: "Rebalance your portfolio periodically to protect against market swings. If you put 60 percent of your portfolio into stocks, 30 percent into bonds and 10 percent in money market funds -- and the stock market chugged steadily rTC up -- your stock position could easily turn into 75 percent of your holdings. Result? You would be more vulnerable to a market decline than if you kept only 60 percent in stocks. To rebalance, add to lagging positions while trimming holdings that have done well." (Kenneth Gregory, editor, No-Load Fund Analyst.)

WORKPLACE ROUNDUP: Inc. magazine, April, runs a useful column about what successful small businesses are doing. Excerpts: "CEOs are back on the road. In recent months the focus has shifted from cutting costs at home to getting out and selling. The most sales-shy owner we spoke to says she's spending 50 percent of her time selling 'and every minute is painful, but necessary.' . . . Though still conservative about hiring in general, small companies are aggressively looking for top managers, including former large-company executives . . . The merit raise is a thing of the past. More than ever before, growing companies are using performance-based incentive programs. Other than cost-of-living adjustments and promotions, financial rewards go to those who produce tangible results."

MONEY SAVERS: Even at this late date, with April 15 only about a week away, it's still possible to reduce your tax bills for 1993. How to do it? Contribute to a tax-deferred retirement plan. Taxpayers can still make these three kinds of retirement plan contributions for 1993: (1) IRAs, where more than 60 percent of taxpayers are eligible for deductions on individual retirement account contributions of up to $2,000. (2) Keogh plans, where self-employed people who set up Keogh plans before the end of 1993 have until the due date of their tax returns, including extensions, to contribute. (3) SEPs: Simplified employee pension plans are another possibility for people with self-employed income. (Material compiled from Tax Hotline, New York Times and Smart Money.)

START EARLY: "Nothing illustrates better the power of long-term compounding than a look at how a teen-ager's contributions to an individual retirement can soar. Consider a foresighted youngster who puts $500 into an IRA each year for five years beginning when she's 13 -- and never adds a dime. Assuming the money grows tax-deferred at an average rate of 10 percent a year, she'll have more than $300,000 at age 65. But, if she waits until after college to begin making annual deposits at age 22, she'll have to contribute in each of the 43 years until she's 65 to accumulate the same amount." (Kiplinger's Personal Finance Magazine, April.) The article explains, "Youngsters can have IRAs as long as they had a job during the year -- baby sitting, delivering papers, flipping burgers, bagging groceries, etc. Up to $2,000 of earnings can be contributed to an IRA."

APRIL SHOWERS: The Baltimore-based T. Rowe Price Japan Fund is listed under "The Best Mutual Fund Returns -- Appreciation Plus Reinvested Dividends, Jan. 1, 1994-March 29, 1994" in Business Week, April 11. The fund, fourth in the listing, returned 17.38 percent. The top three in the list are DEA Japanese Small Company, Capstone Nikko Japan and Japan Fund . . .

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