Skittish buyers should look to quality stocks

The Ticker

February 05, 1997|By Julius Westheimer

SHOULD YOU invest in the stock market now? The usually reliable January Barometer says yes.

With the S&P 500-stock average ahead 6.1 percent last month, the indicator points to another "up" year.

"Since 1950," the "Stock Trader's Almanac" claims, "the 'January Barometer' predicted the market with amazing accuracy.

"Based on whether the S&P index was up or down in January, most years as a whole followed 41 out of 46 times -- an 89 percent batting average," the "Almanac" says. "No other indicator predicted the market with such accuracy."

But Sheldon Jacobs, editor of the No-Load Fund Investor, feels gloomy: "I'm bearish because of the length of this bull market. Stocks never go one way forever. They've climbed so long it's normal for a reversal.

"I also fear the 'presidential cycle.' We've had nine second-term presidents since the 1830s. Eight times, stocks declined the year after re-election. And six times since 1900, when the Dow posted back-to-back gains of 20-plus percent -- like 1995 and 1996 -- we had a bear market the next year."

Stanford Z. Rothschild Jr., highly respected Baltimore adviser, writes, "Prudence dictates lower expectations this year, certainly relative to 1995 and 1996. The S&P 500-stock index rose more than 60 percent in two years. An optimistic outlook is already discounted in market prices.

"Long term, however, high-quality stocks with consistent, above-market earnings growth are positioned to perform well."

TICKER ADVICE: I suggest investing in high-quality stocks, cautiously using the "dollar-cost averaging" strategy.

This technique involves investing a set sum of money at this time, followed by the same amount every six months for several years.

If your stocks rise, you're sitting pretty. If stock prices fall, you buy more shares every six months.

Pub Date: 2/05/97

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