Wall St analysts split on markets

WALL Street's strategists are all over the map when it comes to predicting the performance of US equity markets in 2002.

A poll by Reuters of leading forecasters earlier this month found that the majority in the bull camp expect the benchmark Standard & Poor's 500 to end the year at about 1300, about 11% above its close last Thursday. Long-time bulls, such as Abby Joseph Cohen of Goldman Sachs, say the S&P 500 should be in the range of 1300 to 1425 by the end of next year. However, she predicted healthy gains this year and in 2000 which failed to materialise.

Other strategists believe the recent revival in equity prices, particularly in hi-tech shares, is unsustainable. Corporate profits, they say, are unlikely to turn around as quickly as the market expects. Merrill Lynch said that operating earnings per share for S&P 500 companies will be up a modest 13% next year, compared with a 32% decline in 2001. Investors are ignoring stable-growth companies with quality assets and instead are making 'big bets on cyclical companies on the theme that they will inevitably turn up', Richard Bernstein, Merrill's US quantitative market strategist, said. 'It shows in how much discussion there is about semiconductors and how little there is about food.'

Some strategists are suggesting investors stick with consumer staples and utilities, which are relatively undervalued when compared with 'sexier' industries, such as technology and telecommunications. JP Morgan's Doug Cliggott sees no relief in 2002. Wall Street's leading bear says the S&P will fall 19% next year and is encouraging investors to take advantage of the yearend rally to reduce exposure to the US.