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Cohen: More growth in '99
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December 24, 1998: 11:10 p.m. ET
Goldman Sachs partner sees stocks rising, possible recovery in oil prices
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NEW YORK (CNNfn) - Overall stock gains could exceed 10 percent next year, portfolio manager Abby Joseph Cohen said on Thursday.
But success will require careful research and a willingness to go where other investors are reluctant to venture, Cohen, the Goldman Sachs partner, told host Jan Hopkins on the "Moneyline News Hour with Lou Dobbs."
Here are highlights from that interview:
ABBY JOSEPH COHEN, GOLDMAN SACHS: When we put together our 1999 forecast just a few day ago the rise was equivalent to 10 to 12 percent. We think that something on the order of low double digit is certainly possible. High single digit -- it depends upon where 1998 finally ends up.
We think that next year will be another year of economic growth for the United States. Several sectors that have had profit difficulties the past year of two because the global economy was weak may start to look better and we think sector by sector there are some very interesting opportunities; overall stock prices will be up again in 1999.
JAN HOPKINS, "MONEYLINE" HOST: One area you think might be poised for some kind of a recovery is oil and that's a contrarian call.
COHEN: It's a contrarian call and not designed to be a timing call by any stretch of the imagination. But keep in mind we have been suggesting a notable underweighted position in energy for years. What we are saying is that if the global economy troughs, starts to look a little bit better, supply conditions don't get worse in energy and demand improves, energy prices could start to stabilize, move up a little bit and there's good leverage for the energy companies.
Keep in mind the following: No. 1, winter has begun and heating oil is now in demand. And No. 2, the biggest decrement to energy demand has come from Japan and the rest of Asia. If those parts of the world are now stabilizing, that's something that's helpful to energy demand.
Energy is also denominated in dollars. While the yen was going down relative to dollars, energy prices in Japan were going up even though we enjoyed a dramatic decline in the cost of energy. They are just now beginning to experience that and it could boost energy demand.
HOPKINS: What about other parts of the world - Europe? The Euro is coming on '99. Is that going to be a competitor for the dollar and for our markets?
COHEN: We think that the movement toward European monetary union is in fact a benefit to many U.S. companies because if it spurs economic growth in Europe, U.S. companies that do business there will participate. Keep in mind that the United States has a very large trade surplus with Europe and also keep in mind that as trade barriers get reduced within Europe that allows us to come in and compete effectively as well.
HOPKINS: You are betting that the U.S. economy does not go into recession.
COHEN: Yes.
HOPKINS: And you are betting that the Federal Reserve will at least be friendly and not have to raise rates?
COHEN: I think this is a Federal Reserve that is likely on hold. I think they would like to do nothing, if they can avoid it. And much will depend upon how our economy is performing and how the global economy is performing.
But so much has happened in the policy arena since September. We have had many central banks around the world lower interest rates and we've had the G-7 nations come out in support of the IMF. This is something that I think will ultimately serve to stimulate global economic activity -- maybe not right away but in the coming months.
HOPKINS: So again your forecast for the market by the end of 1999.
COHEN: For the Dow we are suggesting 9,850. Most of our work, however, is done on the S&P 500 where we are suggesting that we can easily get to 1,275.
HOPKINS: And for investors the best place to be. ...
COHEN: It depends upon who you are and what your goals are. I would say, though, in 1999,it's best to really do your homework, focus on those companies where the earnings are there and where the valuation suggests that there is some reluctance on the part of other investors to get involved. I think there will be much more rotation during this coming year.
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