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Investing in a soaring Dow
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March 17, 1998: 6:19 p.m. ET
Bulls are optimistic, but cautious as market indicators reach record highs
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NEW YORK (CNNfn) - The spate of new Wall Street records is pushing bearish thoughts out of hibernation -- but some market watchers insist the U.S. stocks still have room to grow.
After the Dow swept past 8,700 and hit a new milestone many didn't expect until the end of 1998, analysts remain "cautiously optimistic."
"We are in an environment which clearly seems to benefit from a 'feel good' phenomenon," said Alan Ackerman, senior vice president and market strategist at Fahnstack & Co. in New York.
The Dow Jones industrial average closed at 8,749.99 Tuesday. A strong dollar and a good economy helped push all major market indicators to record highs earlier this week. A bullish letter from billionaire investor Warren Buffett helped propel the tidal wave.
The movement was enough for noted market strategist Abby Joseph Cohen to revise her outlook. Cohen, co-chairwoman of Goldman Sachs' investment policy committee, had originally predicted the Dow would hit 8,700 by the end of 1998. On Tuesday, she changed the figure to 9,300.
Ken Ducey, vice president and head of trading at BT Brokerage, a division of Banker's Trust in New York, said he believes the Dow will reach 10,000 by the year 2000. But he thinks a correction of 5 to 10 percent is inevitable in the meantime.
"The momentum is there to keep (the market) going up," Ducey said. "I'm still looking for 10,000 by 2000, but I am looking at a pullback to change the velocity."
Some analysts cite earnings warnings and record valuations as reasons to worry. Other experts wonder if the U.S. market has finished feeling the effects of the Asian turmoil.
Vincent Farrell, chief investment officer at Spears, Benzak, Salomon & Farrell, said investors should heed the earnings warnings from companies.
"It's not healthy or really productive to either be bullish or bearish," Farrell told CNNfn. "That's an extreme position that takes you down the wrong road."
Farrell said the market is trading on momentum -- but the problem is nobody knows when the momentum will end. (148K WAV) or (148K AIFF).
Farrell pointed out that Buffett's outlook hinges on two factors: corporate profits continuing to grow and interest rates remaining steady.
Likewise, Richard Dahlberg, managing director at Salomon Brothers Asset Management, recommended investors consider changing their allocation of assets.
"It might be a good time to look at the bond market," Dahlberg said. (180K WAV) or (180K AIFF).
Ducey, of BT Brokerage, said investors are keeping their money in stocks despite the threat of a correction because, "There's no where else to go."
"People are still buying," Ducey said. Some investors might want to consider "dropping down a tier" in stocks for a safer alternative, he said. For example, instead of buying industry titans like Intel Corp. (INTC) or Microsoft Corp. (MSFT), an investor might look at smaller tech companies.
Fahnstack's Ackerman advised investors to be more selective in picking undervalued stocks.
"Selectivity is likely to be the key of the market," Ackerman said. "Seasoned players are looking for more value opportunities now. They're looking for stocks that missed the rally." 
-- by staff writer Martine Costello
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