Stock Market

It isn't that bond fund managers are defensive these days. But when they say things like, "We're like the Maytag repairman; nobody calls," or, "Did you get second prize and have to write a story on bond funds instead of equities?" you get the sense they feel a tad neglected.Given the performance of most bond funds the past three years, perhaps some benign neglect was in order. Last year, for example, Treasury bond funds had an average total return of 0.77 percent; general government bond funds, 1.72 percent; Ginnie Mae and mortgage bond funds, less than 4 percent; and general bond funds, 6.05 percent.

SUCCESSFUL stock market investing will be very different -- and more difficult -- next year.With the Dow Jones industrial average standing this morning at 7,915.97, up 4,081.85 points, or 106 percent, in three years (on Jan. 1, 1995, the Dow stood at 3,834.12), here are 1998 New Year resolutions for your money:In this aging bull market -- the surge began Aug. 12, 1982, at Dow Jones 776.90 -- I suggest extra caution.Although the economy is strong, inflation dormant and interest rates low, many "positives" are reflected in today's lofty stock prices.

THE DOW JONES industrial average closed Friday at 6,526.07. That's a 3.2 percent haircut for the week and 7.9 percent below the Dow's all-time high of 7,085.16, reached March 11.The Dow's dive can be traced pretty much to one thing: inflation fears. Stock investors are afraid that the strong U.S. economy will spark higher consumer prices, which will prompt the Federal Reserve and the bond markets to drive interest rates higherHigher rates can hurt stock prices by boosting corporate costs, by depressing demand for products and by making bonds more attractive as investments.

The stock market edged higher yesterday, its fifth day of rally. The Dow Jones industrial average gained almost 2 points on heavy volume, to close at 3,323.81.LOOKING BACK: Here is how the stock market behaved under new presidents (first terms only), measured by annual percentage gains in the S.& P. 500-stock index: Truman 15 percent; Eisenhower 15; Kennedy 10; Johnson 6; Nixon 3; Carter Reagan 6, Bush 11 through Oct. 20, 1992. (Figures from Michael Suit, Merrill Lynch, 547-5148)LOOKING AHEAD: "Stock returns are relatively low because the market is very high-priced on fundamentals, offering limited upside potential.

Tokyo -- What does the Tokyo Stock Exchange's 1992 plunge mean to Americans and others outside Japan?Almost since Tokyo's bear market began 27 months ago, Japanese and foreign analysts have warned that financial markets here would send out shock waves that would rock the rest of the world if the exchange ever fell much below half of its peak value in the booming 1980s "bubble economy."Most said the danger to foreign economies would lie somewhere under 20,000 points on the Nikkei 225, the most-watched Tokyo stock index.

WITH THE Dow Jones industrial average standing this morning at 6,081.18, it's worth noting that since President Clinton was elected four years ago on Nov. 3, 1992 -- when the Dow closed at 3,252.48 -- the blue-chip indicator has climbed 2,828.70 points, or a hefty 86.9 percent.WHAT'S AHEAD? "History shows the stock market ahead 7.8 percent in the 12 months before presidential elections, but up a weaker 3.1 percent during the 12 months after." (Merrill Lynch Executive Summary.)MAYBE BY 2000: "It took over 16 years for the Dow average to go from 500 to 1,000, reaching the 1,000 mark in 1972.

OPENING THE NOVEMBER notebook:November is the year's second strongest Wall Street month, rising an average 1.5 percent over 44 years. Best month: December.The 1996 Stock Trader's Almanac says, "There have never been losses in the June-December period of any election year. If there's weakness, it will be in the first five months of 1996."BGE stock is listed under "Our 10 Current Electric Utility Favorites" in S&P Outlook, Oct. 25.RECENT ANNIVERSARY: "Oct. 29, 1929, was the most devastating day in stock market history.

The phone number to request Social Security Form SSA 7004 was reported incorrectly in Wednesday's Business section. The correct number is (800) 772-1213.The Sun regrets the error.WITH THREE trading days to go until midyear -- and both the Dow Jones industrial average and the Nasdaq composite index this morning up about 12 percent since New Year's Day -- many people ask, "Where does the stock market go from here?"CRYSTAL BALL: "In 1987, bonds peaked six months before stocks. Based on the long bond January peak, we're near end of the road for stocks."

IF THIS BOOMING STOCK market worries you after major averages soared yesterday to record highs -- Dow Jones now up 974 points, or 25 percent, since Jan. 1 -- try these alternative investments:"Change your asset allocation by adding new money to bonds and cash reserves. If you're above the 28 percent tax bracket, buy tax-exempt money market and short-term bond funds. Use investment money to pay off debts, also to upgrade your home. Invest the money in yourself by taking courses that improve your skills."

THE STOCK market is becoming a scary place to plunk down the family fortune. In a matter of months, a nervousness has crept into the market spurred by worries that the government will never balance its budget, that food prices are rising and the overall economy is slowing.Many investors, who last year lighted fat cigars with $100 bills celebrating the huge gains they made in stock, have turned skittish.That doesn't mean it's time to bail out of the market, local experts say."To make money, you are going to have to be a real cherry picker," said Richard Cripps, chief market analyst with Legg Mason Wood Walker Inc."