Alger Says Slow and Steady Economic Growth Offers Opportunities.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 13, 2002

Fred Alger Management, Inc. today released its monthly economic review indicating that this is still a time when the markets are more favorable for stocks.

After the market reached a major bottom on October 9th, Alger strongly believes that this offers an ideal opportunity for long term returns.

"The economy still remains in a groove of slow and steady growth and we believe this provides opportunities to make money in the market," said Zachary Karabell, Senior Economic Analyst and Futurist at Fred Alger Management, Inc. "Considering all that has happened in recent weeks, we still believe the relationship between interest rates and potential stock returns has rarely been more favorable for stocks over bonds."

As Alger has indicated in its previous Economic Review, even if earnings are flat and multiples do not expand, stocks offer a substantially higher prospect of long-term returns than risk-free bonds. On October 9th, the yield on a 10-year note went down to 3.58%, the lowest yield in forty years. This means that an interest rate of 3.6% equals an average after-tax return of 2.4%. Using simple interest, this translates into a 24% gain over a ten-year period. Assuming the multiple on the S&P does not expand, and earnings grow by a modest 7% a year, the return on equity will double over the same 10-year period.

U.S. GDP is expanding by about 2.5% a year, and looks poised to do better than that next year. The economic surprises are quite likely to be on the upside, especially as the market continues to stabilize, consumers continue to sustain their spending, and business confidence returns. Once businesses start to ramp up their capital spending, the economy could easily jump into higher gear, but even in the absence of that, the situation is stable and sustainable. And in positive ways that are not yet fully appreciated, the global economy is actually becoming a global economy.

"That means that the domestic market is only one of many avenues of potential growth," concluded Karabell. "We believe that China, for example, is one new market that will have a positive effect on several industries and on numerous U.S. corporations."

Founded in 1964, Fred Alger Management, Inc. is a leading asset management firm employing a bottom up approach in its attempt to identify the fastest growing companies in their respective sectors. Over four decades, Alger has continued its tradition of pure growth investing, independent research and style.

Fred Alger Management, Inc. offers a wide array of investment products which include mutual funds, institutional funds for defined benefit and defined contribution plans, separately managed, sub-advised and wrap accounts and trust services.