Experts predict more of the same for stocks

Investors have seen it all in the last five years - three really bad years on Wall Street, followed by a great year in 2003, topped off by this year's relatively small, but welcome, gains. Millions of investors are now wondering what 2005 will bring.

Locally and nationally, brokers, market strategists, and money managers mostly see 2005 greatly resembling 2004, with modest gains in the Dow Jones industrial average, the Standard & Poor's 500-stock index, and other major indexes.

However, a few foresee a great year for stocks, and a few are saying stocks could plunge in the new year.

"I really see a lot of similarity to 2004," said Al Lancz, president of Alan B. Lancz & Associates, a Toledo-based money-management and stock-advisory firm.

"Investors will find pockets of value and can make some money, but they will have to be selective and careful."

Mr. Lancz forecasts a 7 percent gain in the S&P 500 and an 8 to 10 percent gain in the Dow.

The Dow closed yesterday at 10,829.19, down 25.35 points for the day but still up 3.6 percent for the year, and the S&P 500 closed at 1,213.45, down 0.09 points but up 9.1 percent so far in 2004. And the Nasdaq composite index ended the day at 2,177.00, down 0.19 but up 8.7 percent for the year.

Rita Mansour, branch manager and managing director for the McDonald Financial Group brokerage in Toledo, also believes stocks will rise 8 to 10 percent in 2005.

And Wallen "Buzz" Crane, senior vice president and resident manager of Smith Barney in Toledo, said his firm's strategists are targeting a year-end 2005 Dow of 11,700, which would mean an 8 percent gain from yesterday's close; 1,300 for the S&P, a 7 percent gain, and 2,325 for the Nasdaq, also a 7 percent rise.

Forecasting gains in the 4 to 5 percent range are Kevin Carroll, senior vice president with Wachovia Securities in Maumee, and Sarah Berndt, vice president of Fifth Third Bank Investment Advisors in Toledo.

"We think it will be a rather dull market," said Mr. Carroll, adding that he expects the S&P to end 2005 around 1,270 but fluctuating between 1,140 and 1,300 during the year. "With that trading range, there's opportunity; you just have to actively manage your portfolio."

"I think the market will go up but not a lot," said Ms. Berndt. Her firm sees the Dow at 11,250 by the end of next year, or a 4 percent gain from yesterday, and 1,275 for the S&P 500, representing a gain of 5 percent. She believes interest rates will remain relatively low. "The Fed will be very careful about that," she said.

A recent Business Week Online survey of 67 financial professionals found forecasts for the Dow ranging from 8,000 to 12,750, and averaging 11,263 - which would have been a 6.8 percent gain at the time of the survey but only 4 percent now.

The pros foresaw an S&P range of 825-1,510, averaging 1,271, a gain of 7 percent at the time, but 4.7 percent now. And they pegged the Nasdaq between 1,600 and 2,760, averaging 2,264, which would mean an increase of 4 percent from yesterday's close.

The experts foresee only a 3 percent gain next year in the Russell 2,000 index for small companies, an index that gained more than 17 percent this year.

Wachovia's Mr. Carroll thinks small stocks may do better than most think, and he also likes international and emerging stocks for the coming year, as well as energy stocks, especially oil-drilling and oil-service firms.

Mr. Lancz favors financial companies, including insurance firms, as well as information-technology concerns and software suppliers.

"We still like industrials," said Fifth Third's Ms. Berndt. She predicts that consumer spending will remain steady while corporate spending will increase, and that demand for chemicals and commodities will grow.

McDonald's Ms. Mansour likes some financials, construction-related stocks, and some specialty retailers for the coming year.

Contact Homer Brickey at:

homerbrickey@theblade.com

or 419-724-6129.