Chief investment officer
Assets under management: $41.6 billion
CPI: zero to 1%
S&P 500: 1200 to 1220
NASDAQ: 1975 to 2300
Hot industries: insurance, computer software, media, discount retailers
Hot stocks: Lowe's, Target Brands, Veritas Software, Viacom, St. Paul Cos.
While this year won't be anything like 1999, MFS' Kevin Parke is bullish on the stock market.
"The range of what people define as bullish has become so extreme that I probably would consider myself a bull because I'm looking for a positive return," said Mr. Parke. He expects to see average equity returns in the high single digits, which is a considerable improvement from 2000 and 2001.
One reason: The Standard & Poor's 500 stock index was fairly valued at the end of the year for the first time in several years, Mr. Parke said.
A second reason is corporate earnings, which Mr. Parke looks to bounce back in 2002. Earnings won't be propelled so much by top-line growth as by cost-cutting measures, he said.
"The bigger driver is going to be cost reductions. Some companies that have never had to face cost issues are facing them. Even if demand stays level, they'll have higher earnings off a lower cost base." Still, corporate earnings increases will be spotty as some companies still will be struggling with overcapacity, he predicted.
Economic recovery will be muted this year, he said. He looks for the economy to turn the corner around midyear.
Because corporations overspent during the long bull market, "the recession has been more of a corporate-led recession than a consumer-led recession," said Mr. Parke. The last two years, corporate spending slowed dramatically, and that trend will continue for a while as companies look to pare down, he added.
Meanwhile, Mr. Parke is counting on the software industry to be at the forefront of earnings recovery within the technology sector because the companies didn't suffer from overcapacity and they continue to increase productivity as new software is upgraded and installed.
He also looks for media stocks to improve next year. "It's been a tough year for advertising but we think the signs are well in place that the advertising market has bottomed and will recover," said Mr. Parke. "The strongest franchises will benefit from that."