Coming out of the bear market, which she believes ended on Oct. 9, Kim Goodwin looks for above average growth this year.
Ms. Goodwin, chief investment officer at State Street Research & Management Co., sees 10% growth for the S&P 500 and 12% to 13% growth for the Nasdaq composite. After three negative years, she doesn't think the economy supports a fourth straight down year.
"In 2002, the market pressure was psychological and not fundamental," with issues related to corporate fraud dominating the market, Ms. Goodwin said. "One of the reasons I have more confidence in 2003 is that I think you get a bit of a washout."
Increased regulatory scrutiny has put a lot of focus on corporations so that another Enron-type debacle is unlikely, she added.
"Investors are comfortable enough that there is this level of scrutiny that now they start to focus on the (earnings) and have some level of confidence that it's real."
A recovery largely hinges on an upturn in corporate profits and business spending. A downturn in corporate profits could derail a recovery, she said.
Technology will get a boost this year from a return to information technology spending and a less competitive marketplace, according to Ms. Goodwin. "There's a real possibility that the technology leaders will significantly outperform the second and third tier companies in this space," she said.
Financials will benefit from a benign interest rate environment and increased confidence in capital markets. The consumer discretionary area, namely media, will benefit from a boost in advertising sales.
While most of State Street Research's equity assets are in large-cap growth portfolios, Ms. Goodwin said any bias goes out the window when one looks at the numbers.
Also, Ms. Goodwin looks for growth stocks to outperform value stocks in 2003. "If you look at relative valuation ranges for growth stocks and value stocks, growth stocks are actually less stretched at this point, so in terms of opportunities for upside, there are probably more opportunities for upside in growth stocks in 2003."
C. Kim Goodwin
Chief investment officer
State Street Research & Management Co., Boston
Assets under management: $45.8 billion
PREDICTIONS
GDP: 2.5%
CPI: 2.5% to 2.8%
S&P 500: 1,000
Nasdaq: 1,600
Hot industries: Technology, financials, consumer discretionary
Hot stocks: Intel, USA Interactive, Citigroup, Boston Scientific
