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ECONOMIC CONDITIONS POINT TO 5,000 ON THE DOW BY 1995, PNC ANALYSTS PREDICT

 ECONOMIC CONDITIONS POINT TO 5,000 ON THE DOW BY 1995,
 PNC ANALYSTS PREDICT
 PHILADELPHIA, June 11 /PRNewswire/ -- By 1995, inflation should stand at 2 percent and personal savings will be up to $500 billion -- factors that should help the Dow reach 5,000 by 1995, a top analyst at PNC Financial Corp (NYSE: PNC) predicted Wednesday.
 Robert J. Christian, head of PNC Investment Management and Research, gave a "report card" of factors supporting this forecast to a mid-year investment briefing of PNC Institutional Investment Service clients.
 He cited the following factors:
 -- The Federal Reserve continues to be committed to fighting inflation. He cautioned, however, that Fed policy can change quickly. Inflation should be 2 percent by 1995, down from 5.2 percent in 1989, when PNC first made its 5,000 forecast. "We have no reason to believe there's a tremendous amount of inflationary pressure," Christian said. "Two percent (inflation) is still a viable number (for 1995). We see no reason to change (our forecast)."
 -- The labor force is growing much more slowly than it did during the last expansionary phase, in the 1960s, when a tremendous influx of baby boomers into the workplace meant that the economy had to grow at 6 or 7 percent annually just to keep the jobless rate steady. Because the labor force is growing more slowly, the current slow growth in the economy is not as negative as it would be otherwise, if more jobs were needed for a faster-growing labor force.
 -- As members of the baby boom generation age, they will increase their personal savings dramatically, so that by 1995 the amount of personal savings in the United States will total $400 billion and $500 billion, about double what it is today. That money, Christian noted, will have to be invested somewhere.
 -- Short-term interest rates, based on Treasury-bill rates, should be 4 percent by 1995 and long-term rates, based on Treasury-bond rates, should be at 6 percent. "Short-term rates have fallen much faster than we anticipated because of the sluggish economy," he said, adding that the "overall trend of long-term interest rates is down to that 6 percent number."
 All of this points to PNC's assertion that "we are right on target for 5,000 on the Dow," Christian said. In 1989, again, when PNC predicted 5,000 on the Dow by '95, the DJIA was about 2,500.
 PNC develops a long-term economic and investment outlook so that it can establish the most appropriate asset-allocation guidelines for its customers.
 In other presentations at the mid-year briefing, PNC analysts said:
 -- Consumer stocks, which performed well during the 1980s, are unlikely to repeat that performance in the 1990s, primarily because of slower growth in household formation and in the number of people 25 years of age and older.
 Instead, investors seeking superior returns should turn their attention to capital-goods stocks. The analysts cited several reasons why these companies are generally attractive -- the rebuilding of infrastructure and the automation of offices and factories in the United States and abroad. "Globalization will benefit industrial companies," said Joseph J. Jordan, assistant vice president of equity research. "It's easier to transfer these industrial goods (overseas) because there are no built-in consumer preferences like there are with consumer products."
 -- U.S. railroads, which have undergone some of their most fundamental changes in years, should be considerably more profitable during the 1990s. Charles M. Vincent, vice president of equity research, noted that recent restructurings have resulted in major gains in operating efficiencies and that labor agreements have provided substantial cost savings. "Railroads are becoming much tougher, leaner and more competitive," he said.
 -- The latest round in the airline fare wars is further postponing an earnings recovery in the industry. In effect, said Bruce Thorp, vice president of equity research, the "major carriers are giving away their summer earnings, leaving little hope for a profitable 1992." Thorp said PNC recommends that investors avoid shares in Delta Airlines. PNC remained neutral on the stock of UAL, parent of United Airlines, but it continues to find the shares of Southwest Airlines attractive. Thorp said Dallas-based Southwest, which has developed a niche in serving short-hop business and leisure travelers, operates as a low-cost, low- fare airline that has capitalized on a fuel-efficient fleet and quick- turnaround schedules.
 -- The PNC analysts recommended that investors consider medium-sized companies in assembling their portfolios. "These mid-cap companies do provide superior growth opportunities," said analyst Douglas Lane. Lane noted, for example, that the Standard & Poor's Mid-Cap Index has outperformed the S&P 500 since June 1991. Lane said PNC currently finds nine stocks of these mid-cap companies to be attractively priced, including Omnicom, an advertising agency; Sigma-Aldrich, a distributor of specialty chemicals; and Sonoco Products, which manufactures paper and plastic packaging products.
 PNC Investment Management and Research is affiliated with Provident National Bank in Philadelphia. PNC Financial Corp, headquartered in Pittsburgh, is the nation's 14th-largest bank holding company, with assets of $43.8 billion. It operates approximately 500 community banking offices in Pennsylvania, Kentucky, Ohio, Indiana and Delaware and conducts business through additional offices in 16 states.
 PNC's principal banking affiliates include: Pittsburgh National Bank, Pittsburgh; Provident National Bank, Philadelphia; Citizens Fidelity Bank, Louisville, Ky.; Central Trust, Cincinnati; Bank of Delaware, Wilmington, Del.; Northeastern Bank, Scranton, Pa.; Marine Bank, Erie, Pa.; PNC National Bank, Wilmington; Hershey Bank, Hershey, Pa.; and The First Bank and Trust Company, Mechanicsburg, Pa.
 /delval/
 -0- 6/11/92
 /CONTACT: Linda Wolohan of Provident National Bank, 215-585-5453/
 (PNC) CO: PNC Financial Corp ST: Pennsylvania IN: FIN SU: ECO


CC -- PH036 -- 9475 06/11/92 18:28 EDT
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Date:Jun 11, 1992
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