The bull market is alive and well, says Mary Farrell, an investment strategist for PaineWebber Inc.
It might have gone into hibernation for awhile, but such slow periods are normal, she told a group of her clients in Philadelphia recently.
"I am neither a doomsayer, like some in my profession, nor am I looking for Dow 36,000 in the short term," Farrell said in an interview. She was here to promote her new book, Mary Farrell's Beyond the Basics.
The market dipped so steeply in April and May because investors tend to overreact, and intense fear about the future of Internet stocks spurred a broader sell-off, she said.
"That painful correction, as so often happens, has thrown the baby out with the bath water," said Farrell, who has spent almost 30 years watching the markets, and is guest host of Wall $treet Week with Louis Rukeyser.
Although many stocks are well below their mid-March highs, the fundamentals that have fueled the bull market are still in place.
"Long-term interest rates have continued to decline," she said. Despite several Federal Reserve rate increases, rates remain low enough by historical standards to allow for higher stock prices.
The end of federal deficit spending, combined with a Fed more savvy at managing the economy, should keep inflation in check, Farrell said.
Also, corporate profits continue to swell. PaineWebber is predicting 15 percent profit growth in 2000 and 8 percent next year.
Finally, Baby Boomers saving for their retirements will cause demand for stocks to outstrip supply for the next 13 years, she continued.
But that doesn't mean all America has its act together financially.
Farrell thinks most people fail to set and achieve financial goals such as saving for a college education, one reason she wrote a book in an already crowded field.
"Most people's biggest mistake is not creating a plan, doing it haphazardly," she said. "They own half a dozen mutual funds, some of them so small it doesn't matter, or own stocks with no coherent plan."
Even with professional help, people need to educate themselves by reading financial books and publications to understand what their advisers are telling them, she said. A company retirement plan, such as a 401(k), is a good place to start learning about mutual funds and investing, she added.
Despite the growing popularity of stocks for long-term investors, many people still invest too conservatively.
