Outlook is good for U.S., turmoil in Asia T. Rowe Price chief economist predicts no end in '98 to bulls' run

Modest growth expected

Global economies

December 04, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

NEW YORK -- Despite economic turmoil in Asia, the U.S. economy should continue to hum along next year, and the environment for stocks appears "outstanding," the chief economist at T. Rowe Price Associates Inc. said yesterday.

Paul W. Boltz, chief economist with the Baltimore-based mutual fund company, expects low inflation and the economy to grow about 2.5 percent next year, keeping in tact the country's seven-year business expansion.

Nevertheless, T. Rowe Price executives said they expect the stock market to continue to be volatile and to grow far more modestly -- in the 5 percent to 9 percent range -- than it has over the past three years.

"The outlook for the U.S economy remains sunny indeed," said Boltz, who spoke to reporters yesterday in New York at the company's annual investment and economic outlook briefing. "We are living through an absolutely unprecedented era of prosperity in the United States. What we are living through is just astounding."

Before 1980, the average business expansion lasted 33 months and was followed by a recession of 18 months, Boltz said. But the current expansion has been sustained since 1991.

Boltz said consumer sentiment is in the "euphoric territory."

Despite the optimism, he doesn't expect the economy to overheat, and he sees little reason for the Federal Reserve Board to raise interest rates. "I think the Fed is going to be deeply in neutral territory," Boltz said.

The strong economy has meant record gains for stocks and the mutual fund industry. The Dow Jones industrial average is about to complete an unprecedented third straight year with gains of more than 20 percent.

"In the future, we believe investors will have even higher expectations," said George A. Roche, T. Rowe Price's chairman and president.

Mutual funds have benefited by growing to $4.3 trillion in assets under management. There are more than 500 mutual fund companies with 6,600 funds.

Price has $125 billion in assets under management of which $80 billion is in 73 mutual funds. It is the 11th largest mutual fund company in the country.

That is not to say there are not issues facing mutual fund companies. Funds such as T. Rowe Price's New Asia Fund, down about 13 percent this year, have struggled in the wake of political and economic problems in Japan, Thailand, Indonesia and other Asian countries.

"That has obviously been a difficult area," said M. David Testa, chairman of Rowe-Price Fleming International Inc., the company's international mutual fund arm.

But Testa said investors shouldn't "write off" Asian countries because they will eventually work through their problems.

He said that the overall performance of Price's funds was good this year, but not as good as in past years. Problems in Asia have dragged down returns. So has the lackluster performance of small stocks, which have been passed over by investors for blue-chip companies.

"This year brought us back to earth a bit," Testa said.

Pub Date: 12/04/97

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