How long can the party last? Expert brokers, analysts and asset managers share their take on the market and where they think you should invest in these unsettled times.

IF EVER THERE WAS A TIME IN THE MARKET that proved the limitations of conventional wisdom, it's been 1996 to date. After a period of almost spastic speculation--much of which portended doom, gloom and a crash--the stock market, at presstime, was floating at a record-breaking 5601. And that was the seventh record-breaker in a row.

Despite an appealing backdrop of low inflation, stable-to-high consumer confidence and dropping interest rates, the naysayers persist. The market is dangerously overvalued, they argue, and due for a major correction. The fact that we've been hearing the same refrain for the past two years shouldn't lead us to discount them. Their day may come. But in the meantime, there's no reason for investors not to be moderately bullish throughout the rest of the year. Cautious optimism currently rules.

That said, BLACK ENTERPRISE recently asked top retail brokers, asset managers, investment analysts and mutual fund managers where investors should put their money in these unsettling times. Their opinions varied, but there was one common link: This year is not last year.

On the other hand, the Fed's January cut in interest rates from 5.5% to 5.25% spurred stock and bond markets, giving leery investors a reason to smile. Still, investors should proceed with caution.

In 1995, U.S. investors benefited from the financial equivalent of harmonic convergence--a New Age belief that when the planets align with the sun, fortune follows. Similarly, the profits U.S. financial markets reaped occurred due to the aligning of low interest rates, technological advances and increased productivity that boosted earnings--attracting more stock and bond buyers.

Year-end numbers confirm the tale. Chicago-based mutual fund analyst Morningstar Inc. showed that U.S. diversified equity funds were up 31%, while international stock funds were up 9%.

With that track record in mind, financial planner Steven Sanders hopes buyers won't suffer "investment remorse." That could occur if they dump equities when "only" a 10% to 15% average annual return is projected in 1996. Unfortunately, Sanders, CEO of Sanders Financial, a Philadelphia-based investment firm, says "a lot of people make bad investment mistakes because they want to see last year's returns this year."

THE ECONOMY AND THE MARKETS

There are positive economic signposts ahead. In fact, analysts project moderate growth, low inflation and low unemployment--all of which will buoy financial markets.

Naturally, there are pessimists. John Rogers is one. The CEO of Chicago's $1.3 billion Ariel Capital Management (which includes the Ariel Growth and Ariel Appreciation Funds, the Ariel Premier Bond Fund and institutional money management), Rogers says the U.S. is already in a recession. Stocks are overpriced and selling at very high multiples to historic price and yield, while companies struggle for estimated earnings. In response, Rogers urges investors to avoid cyclical industries, such as automobiles and computers, and focus on goods and service providers.

A number of fixed-income specialists are also pessimistic. They say equities have been weakening since the buildup of fourth-quarter 1995 retail inventory. Decreased orders, productivity and employment followed, in turn, resulting in reduced household sector spending and a projected second-half recession.

Fortunately for investors, not every analyst sees storms over the horizon. Charles Ross, president of Atlanta-based Financial Media Services, says the Fed is doing its utmost to move the economy forward, and low inflation and interest rates bode well for corporate and individual borrowing. Plus, a stock market dip means little when a 100 point drop is less than 2% of a Dow Jones index of over 5,000, adds Ross, host of "Your Personal Finance," a nationally syndicated radio program.

[ILLUSTRATION OMITTED]

Fixed-income expert Ladell Graham agrees. In fact, Graham, the president and chief investment officer of Houston-based Smith, Graham and Co., doesn't believe the negative hype: There will be no recession, he says. Instead, growth will be slow to moderate with U.S. allies helping to boost the U.S. markets as they cut interest rates, asserts Graham, whose company, a $1.8 billion fixed-income asset management firm, posted an 18% return on investment in 1995.

EQUITY MUTUAL FUNDS

So, now that you know everything will be OK, how do you make some money? Listen carefully and take notes.

Barbara L. Bowles, CEO of Chicago's $180 million Kenwood Group, is still bullish even as she predicts a midyear market correction if the Fed doesn't again reduce interest rates. Last year, her equity investments had a 31% return but she projects only an 8% total market rise in 1996. In response, Bowles says investors should examine industries that didn't fly high last year. One is energy, where the search is on for quality utilities giving decent dividends. A utility high on her list is Entergy (NYSE: ETR), an electricity provider operating in the Southeast, Colorado and Texas. She also recommends oil companies Phillips Petroleum (NYSE: P) and Unocal (NYSE: UCL).

Retail stocks are trickier. Bowles wonders if large corporate layoffs may ultimately soften them. But she keeps buying Toys "R" Us (NYSE: TOY), noting that critics focus on its U.S. sales while ignoring global growth. The Chicagoan is also bullish on select electronic communications supply companies such as Amphenol (NYSE: APH), which makes high-speed-transmission coaxial cable.

Atlanta's Charles Ross can't understand who would want a 5% CD when stock and bond funds with better returns are available. Plus, he says that the billions of 401(k) dollars pouring into a host of no-load mutual funds have created a niche for every investor.

Conservative investors, he suggests, should look at an index fund, such as Vanguard (800-662-7447), which has a five-year 16% average return on stocks mirroring the S&P 500 index. Another strong choice is the Newberger and Berman Partners Fund (800-877-9700), which invests in established companies. If you're more daring, try the 20th Century Ultra Fund, which has beat the market average for five years. Another aggressive growth fund with a strong track record is the Crabbe Huson Special Fund (800-541-9732).

But don't leave every dollar in America. For diversity, Ross likes the Vanguard International Growth Fund (800-662-7447), which tracks multinationals such as Hitachi and Phillips Electronics.

Ross relishes a back-to-basics approach. To him, buying brand names, such as IBM (NYSE: IBM), Coca-Cola (NYSE: KO), and Colgate-Palmolive (NYSE: CL), and steady earners McDonald's (NYSE: MCD) and Eastman Kodak (NYSE: EK) is smart, if not sexy.

Unless you are an expert, though, stay away from technology stocks, Ross says. He wonders about Netscape (NYSE: NSCP) with its negative P/E ratio, and questions the prospects of market darlings like America Online (NYSE: AMER). But he does like Apple Computer (NYSE: AAPL) for its takeover potential.

Philadelphia's Sanders, who has $35 million under management for 300 clients, is sure the 1996 markets will rise as low interest rates, greater productivity and low overheads combine to produce good margins. True, compared with 1995, the uptick will be modest, perhaps 10% to 15%. However, Sanders notes, "there hasn't been a down stock market in an election year since 1960."

One industry both Sanders and Ross recommend is banking. Lower interest rates and baby boomer investors have increased its value. Sanders thinks PNC Corp. (NYSE: PNC), which merged with Midlantic Bank, is a buy. The East Coast bank is the fifth largest bank money manager and the 32nd largest U.S. investment manager. Ross likes Wachovia Bank (NYSE: WB) because of its Southeast presence, strong earnings and sound management. He also admires Suntrust (NYSE: STI), an Atlanta-based bank favored by Warren Buffet. Ironically, some analysts think Suntrust may buy Wachovia.

There is no hint of technophobia in Sanders' recommended portfolio since he believes that we are in a demand period for both computer service and technology. One company he likes is Safeguard Scientific (NYSE: SFE). It invests in other technology companies--such as Novell, Cambridge Technical Partners and Coherent Communications--that make and distribute computer software and hardware products. In 1995, its stock, which split several times, was up 330%; Sanders says the roof has not even been sighted. Coincidentally, Safeguard just bought into the African American-owned RMS Technologies Inc. (No. 6 on the BE INDUSTRIAL/SERVICE 100 list). Sanders says Safeguard is a careful buyer and adds value through rights offerings.

The related industry of telecommunications remains strong. One buy recommended by Sanders is Comcast Corp. (NYSE: CMCSA). The third largest cable provider, it reaches 51 million homes. Comcast also has four million cellular phone clients and owns a piece of QVC with TCI. All of which adds up to a very good buy.

The health care industry is driven by consolidation, efficiency and changes in the medical services delivery system. It includes national publicly traded hospital chains that prosper through consolidating resources and bulk purchases. Even congressional budget-cutting proposals will assist them. Flat fee payments for Medicare will reward the lower-cost hospitals that provide service for less money. The payoff for these hospitals is that they can keep the difference.

Thus, size plus efficiency equals thick net income. Sanders' favorites include Columbia/HCA (NYSE: COL), which "is to hospitals what McDonald's is to fast food," he says. The largest U.S. health care chain, with 62,000 beds in 26 states, Columbia/HCA combines economies of scale with excellent cost control to produce high profit margins. This chain, whose stock rose 39% in 1995, grows through acquisition and is looking for a major nonprofit hospital to buy. It could be OrNda Health Corp. (NYSE: ORND), up 86%, a multistate chain that specializes in buying underperforming hospitals and modernizing them, increasing admissions and profitability.

Moderate growth and solid, if not spectacular, returns are also expected by registered investment advisor James Herbert Hunt IV. The Howard University grad, who operates the Dallas-based Hunt Investment Advisers, says he knows of several no-load funds that should make his clients happy.

Hunt (whose firm is affiliated with but independent of Steven Sanders') says the key to his selection is an examination of the funds' money managers for style, consistency and innovation. Among large cap funds, he likes Newberger and Bergman Guardian, while the Wasatch Micro Cap Fund (800-551-1700) is his small cap specialist.

This Texan is bullish globally. He projects that international stock markets will outperform their U.S. domestic counterparts as global interest rates drop. The result, he says, will be that investors should expect a 9% to 12% return on their money with U.S. stocks and bonds, while their overseas return should be 12% to 15%.

The Warburg Pincus International Fund (800-888-6878) and Hotchkis and Wiley International Funds (800-343-5700) top his global list; he favors Montgomery Emerging Markets Fund (800-572-3863) and Calvert New Africa Fund (800-368-2745) among emerging markets funds.

There are, of course, always investors who like challenges. For them, Hunt recommends the Warburg Pincus Post Venture Capital Fund (800-888-6878); he calls it perfect for individuals who want to play the IPO market at 2% to 3% of their overall portfolio. "Anyone under 50 with a long-term investment horizon should put a couple of points in this area," he says.

Another option he has for keen-eyed investors is the Merger Fund (800-343-8959). This fund's managers--who he says are low risk takers even if they sound otherwise--wait until a merger announcement is made and then buy in. Hunt says Morningstar calls the Merger Fund a way to spruce up a portfolio.

FIXED-INCOME OPPORTUNITIES

During the past 10 years, equities and fixed-income instruments have fallen and risen like a pair of nearly side-by-side roller coasters. Granted, stock highs were higher but as long as the economy was expanding and interest rates were low, healthy returns on investment were expected by fixed-income investors as well. For example, in 1995, taxable fixed-income funds grew on average 15%, while tax-free fixed-income funds averaged 16% growth.

No one expects to duplicate those numbers in 1996. But one downbeat fixed-income analyst says that investors will be looking for angles for better returns in a low-yield environment. Naturally, Jones, who was head of the fixed-income division of the national investment firm of Raymond James Inc., notes that investors should be aware that the federal funds target interest rate, now around 5.5%, may plunge as much as one point; 30-year notes may drop below 5.5% by 1997.

Of course, there are ways of getting a higher yield, such as investing in debt with longer maturities, buying debt of riskier issuers or buying nonstandard notes, including interest-only and principal-only securities. The only question is do you have the nerve or foresight to employ these approaches.

Charles Ross takes away some of the mystery. He suggests looking at the T. Rowe Price High Yield Fund (800-638-5660), which invests in seven-to-10-year corporate bonds of less than brand name companies. Consequently, it has a 9% return. He also likes the Dodge and Cox Income Fund (800-621-3979), which posted a 20.2% return on corporate bonds in 1995, and U.S. government agency and commercial paper, such as Fannie and Ginnie Mae and the General Motors Acceptance Corp.

A couple of domestic fixed-income funds score well with James Hunt, who touts the Dreyfus Short-Term to Intermediate Government Bond Fund (800-645-6561) and the Federated High-Yield Trust Fund (800-245-2423). On the international side, he leans toward the Liberty International Income Funds (800-245-4770).

Finally, Steven Sanders says a serious look should be given to municipal bonds. He has heard rumors about the bonds losing tax-free status but discounts this talk. He says that Congress is unlikely to take away the advantage highly taxed individuals cover.