Chief investment officer
Kansas City, Mo.
Assets under management: $82 billion
GDP: 1.5% to 2%
CPI: 1.6% to 2.2%
Fixed-income total return: 5%
S&P 500: 1250
Hot stock: EMC
Forget speed. Just hope for steady. American Century's Randy Merk is bullish, but tempered, on prospects for this year: "The economy will accelerate, but only to about 35 mph, not 60. In all, if fixed-income earns 5%, stocks earn 7% to 8% and the NASDAQ returns 12%, I think it will be a great year."
Mr. Merk doesn't anticipate "a quick or particularly strong turnaround." The economic stimulus package won't affect the economy for some time and combined with high unemployment, recovery is unlikely until well into 2002.
That said, Mr. Merk is bullish on stocks for 2002 because of a lack of interesting alternatives. "Stocks don't have much competition right now from fixed-income investments. Unlike the Japanese investors, who have given up on equities, we (the U.S.) now have a generation that is more comfortable investing in stocks. It will take more than this to shake them out. However, I don't see a resumption of '99 returns; the tough part for investors is being patient."
As to where to wait it out, Mr. Merk thinks value stocks might have been a tad overvalued in the past 18 months, while growth stocks are fairly accurately valued right now.
"I think large-cap value funds may still have their day. We've already begun to see a shift from small-cap value to midcap; I think large cap will follow. Also, don't underweight international equities. If you've shifted out of them, now is the time to rebalance - they'll be back."
He said American Century is "urging investors to stay with high credit quality, Treasuries, agencies, high-quality corporates, or high-quality municipals."