President and chief investment officer
Banc of America Capital Management Inc.
Assets under management: $280 billion
S&P 500: 1250
Hot sectors: industrial cyclicals
Stock picks: Microsoft, United Technologies, Procter & Gamble
The stock market will be volatile in 2002, but by the end of the year, Michael Kenneally expects it will come back from 2001 levels.
"We think the stock market has moved in anticipation of a recovery," Mr. Kenneally said. "We expect to see signs (of recovery) in late spring and early summer.
"We need a little time, but it will occur," Mr. Kenneally said. "What is needed to get the economy going again is renewed capital investment."
Mr. Kenneally doesn't think the economy has bottomed out yet.
"We're close to the bottom but it will be awhile until we see some improvement," he said.
Consumers spent a lot of money on technology just prior to Y2K, he said. Because personal computers have a life expectancy of about three years, Mr. Kenneally anticipates there will be increased demand for personal computers and software.
If Congress passes tax incentive legislation, that also could get companies to buy capital equities.
In the meantime, now would be a good time to consider buying industrial cyclicals, he said.
"You could make modest moves to start to own industrial cyclical stocks. Move in that direction, but you have time to do that," he said.
Mr. Kenneally also predicts the technology sector will improve this year. At the end of 2001, technology stocks already reflected some improvement. For example, he said Microsoft Corp. will be a good buy because the company has some new products coming out in 2002 that he thinks will generate good revenue growth for the company.
Another winning stock could be United Technologies Corp., Mr. Kenneally said. "It is a diversified industrial goods stock. It's inexpensive and has very strong earnings."
He also likes Procter & Gamble Co. "It's a world-class marketing company that seems focused on basic business." Mr. Kenneally said that equities or alternative investments will be better investments than fixed income this year. "