ENJOY THIS year's stock market returns. Gains next year won't be at this level again, say market experts offering advice on the best investment opportunities for 2004.
The Nasdaq composite index, loaded with technology stocks, is up nearly 48 percent for the year. The Dow Jones industrial average of 30 blue-chip stocks and the broader S&P 500 index have gained around 24 percent.
"We had paradise in 2003. Keep in mind, we had to deal with a war in Iraq, continued war on terrorism, more greed exposed on the New York Stock Exchange, more scandals in the mutual fund industry, but we overcame all this," said Al Goldman, chief market strategist with A.G. Edwards & Sons in St. Louis.
Goldman expects the three major indexes next year to end up 12 percent to 14 percent.
"Strong first half, lackluster second half. That's our theme," said Richard Cripps, chief market strategist for Legg Mason Wood Walker Inc. in Baltimore. Cripps predicts the Nasdaq may end next year with no gain or possibly be down 20 percent, while the other two indexes might be flat.
For investors, finding next year's best investments may require a shift in strategy, experts said. This year's leaders may well be tomorrow's laggards. And there's a series of factors at play next year that can affect the market for good or bad: The presidential election. Unemployment. A potential rise in interest rates.
For example, election years, no matter who is in office, tend to be good for the market because administrations usually pull out all the stops to boost the economy and employment to win re-election.
Right now, many expect President Bush to be a shoo-in, particularly with Saddam Hussein's capture and the growing economy. But Cripps is among those predicting a close election.
"We have a divided electorate," Cripps said. "The possibility that we could have a change of administrations could really inject some uncertainty in the market." And, as we've all come to know, the market hates uncertainty.
So, with the caveat that events and assumptions can change, market experts gave their take on the best places for investors' dollars next year:
Goodbye, small caps. Shares of small- and mid-size companies prospered in the bearish market. If you had invested, say, $10,000 in the S&P 500 large-cap stocks three years ago, it would be worth about $8,000 today, Cripps said. But $10,000 in small and mid-cap stocks would have grown to $13,000.
